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The New Federal Overtime Requirements: What Nonprofits Need to Know

Overtime pay note on an employer's desk

On April 23, 2024, the U.S. Department of Labor announced a final rule that updates and revises the regulations previously issued related to the Fair Labor Standards Act (the “FLSA”) related to minimum wage and overtime pay requirements. These new federal overtime requirements start on July 1, 2024.

 

According to the Economic Policy Institute, it is estimated that these changes will affect 4.3 million employees, including many that work at nonprofits. 

 

The FLSA sets forth federal standards for minimum wage, overtime pay, recordkeeping, and youth employment. Employees whose jobs are governed by the FLSA are classified as either “exempt” or “nonexempt.” Nonexempt employees are entitled to overtime pay while exempt employees are not. Under the FLSA, nonexempt employees must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and a half their regular rate(s) of pay.

 

1. Key Changes to Exemption and Overtime Rules.

As before, employees in certain administrative, professional, and executive positions may be classified as exempt if they perform specific job functions. One of the most significant changes from the updates is the increase to the salary threshold for these exempt employees. The new income threshold for this exemption is:

 

    Administrative, Professional, and Executive Exemptions:

        $844/week ($43,888/year) starting July 1, 2024.

        $1,128/week ($58,656/year) starting January 1, 2025.

 

Any employee earning less than these amounts is nonexempt and employers must pay them overtime benefits.

 

For administrative, professional, and executive workers who do not perform the specific job duties outlined in the FLSA rules, they may still be classified as exempt if they are highly compensated employees (“HCEs”).[1]  The new salary thresholds for HCEs are:

 

    Highly Compensated Employees:

        $132,964/year by July 1, 2024.

        $151,164/year by January 1, 2025.

 

These thresholds will continue to rise every three (3) years. 

 

2. Does This Rule Apply to Your Organization?

Most likely, yes. If your nonprofit employee is engaged in interstate commerce on the job, you must comply.  “Interstate commerce” is a very broad term that includes handling goods that have moved between states or sending bank wires between states. These are tasks that most nonprofits engage in, so it is very likely that your organization will need to comply with the new overtime rules.

 

3. State vs. Federal Law?

If state and federal law differ, which it does here, your organization must follow the law that is most favorable to your employee(s). In this case, nonprofits must adhere to the new federal rules related to overtime for nonexempt employees as they are more generous than Minnesota’s laws.

 

4. Preparing for the Changes.

  • Review Exempt Positions: Once you are certain your employees are correctly classified as exempt or nonexempt, identify those exempt positions that will not meet the new salary thresholds.

  • Cost Analysis: Compare the cost of raising salaries to meet the new thresholds versus paying overtime.

  • Consider Intangible Impacts: Recognize that changes in exemption status can affect employee morale and increase administrative burden.

  • Communicate Changes: Minnesota law requires advance notice of pay changes to employees.

  • Ensure Implementation of Record-keeping Systems:  Confirm that your nonprofit has systems in place to accurately track employee hours, especially for nonexempt employees who are eligible for overtime pay and for highly compensated employees that do not meet the FLSA job duty requirements as an executive, administrative, or professional employee that are working over 48 hours in a week.

 

Are you still unclear about whether (or how) this new law will affect your organization? Legal for Good is here to help. Send us an email to set up a time to discuss your specific questions and concerns today, so you’re prepared for tomorrow.

 

The information provided is for informational purposes only and does not constitute legal advice or create an attorney-client relationship. Contact us or consult with your attorney to ensure compliance.


[1] Note that Minnesota employment laws currently do not recognize the federal HCE rule listed here.  Therefore, Minnesota employers still must pay overtime to HCEs that do not meet the FLSA job duty requirements as an executive, administrative, or professional employee that are working over 48 hours in a week based on Minnesota’s overtime rules. 

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