Non-Profits and the Proposed FLSA Overtime Pay Protections

In a recent post by David Weil Administrator in the Wage and Hour Division of the Department of Labor, he clarifies the non-profit overtime regulations of the FSLA. The Department of Labor recently proposed a rule updating the overtime regulation for white collar employees. Most employees of non-profit organizations are entitled to the minimum wage and overtime protections guaranteed by the Fair Labor Standards Act. The protections will not change but the proposal has brought into focus some issues and misconceptions about the FLSA’s decades-long applicability to non-profits.


As in for-profit organizations, employees at non-profits may be entitled to the minimum wage and overtime pay protections on an enterprise or an individual basis.

  • Enterprise coverage. Generally speaking, a covered enterprise is one with an annual volume of sales made or business done of $500,000 or more per year. Non-profit charitable organizations are not covered enterprises under the FLSA, however, unless they engage in ordinary commercial activities that result in sales made or business done that meets that threshold. Ordinary commercial activities means operating a business, like a gift shop. Activities such as providing free temporary shelter, free clothing, or free food to homeless persons, however, are not considered ordinary commercial activities; rather, they are charitable in nature and enterprise coverage does not apply.
  • Individual coverage. Organizations that don’t meet the tests to be covered on an enterprise basis likely still have employees who are covered individually. An employee who engages in interstate commerce is covered by the FLSA. Such activities include making out-of-state phone calls; mailing information or conducting business via the U. S. mail; ordering or receiving goods from an out-of-state supplier; handling credit card transactions; or performing the accounting or bookkeeping for such activities. As the Department of Labor has said in the past, however, they will not assert individual coverage for employees who perform this type of work only on occasion, and for an insubstantial amount of time.


To explain this further, take for example a non-profit animal shelter that provides free veterinary care, adoption services, and shelter for homeless animals. Those are charitable activities. In addition, the shelter provides veterinary care for a fee to customers, which is a commercial activity. If the revenue generated from the organization’s commercial activities is at least $500,000 in a year, the employees engaged in the commercial activities are protected by the FLSA on an enterprise basis. Employees of the organization’s charitable activities are not covered on an enterprise basis since those activities do not have a business purpose. However, an employee who spends a considerable amount of time fundraising on the phone and taking credit card donations from other states would be individually covered.

FLSA Facts

The following points clarify responsibilities that non-profit organizations, like for-profits, have under the FLSA.

Fact: Any employee can be paid on a salary basis, but just because someone is paid on a salary basis doesn’t mean they are exempt from overtime pay. White collar salaried employees who do not meet the salary and duties test for exemption are entitled to the guaranteed time-and-one-half their regular rate of pay for all hours worked beyond 40 in a work week. Again, the proposed rule doesn’t change this.

Fact: For workers whose duties do not qualify them for an exemption from overtime and who work more than 40 hours in a week, non-profit organizations — like all business organizations — have multiple options on how to respond to the rule as proposed should it become final. The organization may:

  • Limit the employee’s hours to 40 or fewer each week. In this case, no overtime would be due and the organization could continue to pay the employee his or her current salary.
  • Hire an additional worker to perform the extra hours.
  • Pay the employee the overtime premium for hours beyond 40 in a week.
  • Pay the new salary level to maintain the exemption.


Employers are free to choose these and other options that work best for them and their employees.

Open Comment Period for Proposed Overtime Rulemaking

The recently proposed overtime regulation would increase the current salary threshold for exemption from $455 a week (the equivalent of $23,660 a year) to $970 a week to ($50,440 a year) in 2016. The rule will also establish a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption. Read the Department of Labor Fact Sheet.

You are encouraged you to make your voice heard. Please share your comments, opinions, or recommendations about the proposed overtime rule via by September 4, 2015.

Want more info about this? Contact Payroll Masters.

Source: Dr. David Weil, administrator of the Wage and Hour Division of the DOL.

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