April 25, 2018
Nonprofits Get Reprieve from New Overtime Rules

November 29, 2016 — Massachusetts nonprofits, and their counterparts nationwide, got a temporary reprieve when a federal judge in Texas last week granted a preliminary injunction blocking new overtime rules affecting exempt and non-exempt employees that were to take effect on Dec. 1.

The new rules aimed to double the pay level—from $23,660 to $47,476 annually—below which workers would be eligible for overtime.

“Congress gave the [U.S. Department of Labor] the authority to define what type of duties qualify – it did not give the Department the authority to supplant the duties test and establish a salary test that causes bona fide EAP’s to suddenly lose their exemption 'irrespective of their job duties and responsibilities,’” the decision reads. EAPs are people working in executive, administrative, or professional jobs.

Judge Amos Mazzant was to issue a ruling on the merits, possibly as early as this week, but many observers believed, given the language of the temporary injunction, he would likely strike down the regulation, The New York Times reported.

"Nonprofits across the country have scrambled in recent months in an effort to make the rule change feasible, at least in the short term, both operationally and financially," according to The NonProfit Times.

Last week's ruling caught many nonprofit leaders by surprise and puts in limbo a policy shift that had already sparked debate about how to properly compensate people who work in the charity world, according to David Thompson, vice president of public policy at National Council of Nonprofits, quoted in the Chronicle of Philanthropy.

The Massachusetts Nonprofit Network (MNN), the state's nonprofit trade association, today told its members that the injunction " does not affect the applicability of existing requirements under the federal Fair Labor Standards Act (FLSA) or state or local employment laws. In other words, compliance with existing labor laws is still crucial for nonprofits to maintain their status."

There are, according to MNN, 529,000 nonprofit sector jobs in Massachusetts, accounting for about 17% of the workforce. However, neither MNN nor Third Sector New England, a Boston-based, nonprofit management advisor to nonprofits, could say how many Massachusetts nonprofit workers would have been impacted by the pay raise had it gone into effect, although many are paid near the $47,476 threshold.

The Boston chapter of the Appalachian Mountain Club, a nonprofit that supports outdoor recreation and environmental activism, in preparing for the new rules, had told its employees that their 35-hour work week was increasing to 40 hours, but that their pay would remain the same, The Boston Globe reported, with many to be reclassified as hourly employees. That change was reversed before the preliminary injunction was instituted, and since then the club has put all its plans relating to the new rules on hold, the paper noted.

For more, see our Expert Advice column, How Nonprofits Can Prepare for the New Overtime Rule.

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