Caryn G. Pass, Attorney at Law, Krupin O'Brien LLC, Washington, DC predicted that the Department of Labor was about to increase audit levels with respect to non-profit complaince with the The Fair Labor Standards Act (FLSA). Ms. Pass made this prediction during her excellent and lively presentation at last week's 10th Annual Risk Mangement Institute in Washington, DC (sponsored by the Nonprofit Risk Management Center). The FLSA sets minimum wage and overtime standards applicable to hourly and certain salaried employees. This isn't exciting stuff (at least until you are faced with a problem), but working on your organization's "blocking and tackling" could avoid costly problems....
| Our Guide, "Avoiding Trouble While Doing Good, A Guide for the Non-Profit Director and Officer," keeps our message interesting by using many case studies, simulations, and video and audio clips. But we do block and tackle, covering some basic topics that will keep you out of trouble. Buy a copy of our Guide today. Call us at 888.824.6706 for additional information. We also do on site training. |
The FLWA distinguishes between what are termed "exempt" and "non-exempt" workers. Employers are required to pay non-exempt workers a minimum hourly wage, plus overtime when the work week exceeds 40 hours. Currently, the federally mandated minimum wage is $5.15 per hour. However, organizations must keep in mind that each state has an analogue to the FLSA, and that certain states may require a higher minimum wage. The FLSA does not provide any special exemption for non-profit entities. It applies to most employers.
The critical issue for any employer is correctly classifying workers as exempt or non-exempt employees. The Department of Labor has developed three tests for classification purposes. An employee is considered to be an exempt employee if his employment satisfies each of the following three tests: (i) the employee is paid a predetermined and fixed salary, not an hourly wage that is subject to reductions because of variations in the quality or quantity of work performed (the ‘‘Salary Basis" test); (2) the amount of salary paid meets minimum specified amounts (the ‘‘Salary Level" test); and (3) the employee’s job duties must primarily involve managerial, administrative or professional skills as defined by Department of Labor regulations (the ‘‘Duties" test’). Employers have discovered that classifying employees can be particularly difficult in the case of part-time employees and administrative assistants. The other issue that comes up is correctly calculating the employee's hourly rate for overtime purposes. That number is not necessarily the stated dollars paid per hour, but must take into account certain nondiscretionary payments which can include annual and retention bonuses, depending on how such payments are structured.
To illustrate a classic problem a non-profit may encounter under the FLWA, consider
Greenville Social Services, a hypothetical Section 501(c)(3) organization. It has 25 employees, including Jerry Wiseman, the administrative assistant to Wendy Jones, Greenville's executive director. Jerry is a salaried employee earning $45,000 per year. He runs Greenvillle on a day-to-day basis while Wendy is out fundraising and making speeches. However, Wendy does schedule a 90-minute meeting with Jerry each day, where Jerry informs Wendy about operational matters and Wendy instructs Jerry about what he should be focusing on. Jerry is very busy, often working through lunch while he reviews reports and writes letters for Wendy's signature. Jerry is entitled to comp time when he works in excess of 40 hours per week.
One day, while making a speech, Wendy is offered a position with a much larger social services agency at double her current pay. Jerry had always hoped to assume Wendy's position, but the Greenville board brings in Mary Treadwell as the new executive director. Shortly after Mary assumes her new role, Jerry leaves Greenville under controversial circumstances. Jerry hires a lawyer, and brings action against Greenville, alleging violations of the FLSA. He claims that he was not an exempt employee because he didn't actually exercise discretion and independent judgment with respect to matters of significance, but rather only did what Wendy told him to do. He now wants time and a half for all the lunch hours he worked, plus all the time he worked at night and on weekends.
This sort of suit, particularly if a number of employees are involved, can be a nightmare for an agency with a very tight budget. This is why the board must make sure that the human resources department or other appropriate individual is on top of FLSA compliance. Any compliance program should mandate an annual (or more frequent) review of FLSA compliance and employee classifications, as well as an annual report to the board by the person responsible for FLSA compliance. As in all employment-related matters, the organization needs to be cognizant of applicable state requirements.
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THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NON-PROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL.
If you liked this post, please visit http://www.charitygovernance.com for a description of our Guide/Tutorial for non-profit directors and officers entitled “Avoiding Trouble While Doing Good: A Guide for the Non-Profit Director and Officer.” Copyright 2004, Auto Didactix LLC. All Rights Reserved. You may not copy any portion of this post to a computer "clipboard" for reposting anywhere or e-mailing, or otherwise reproduce this post. If you want others to review this post, you may provide them with a link to this web blog. Any use of the material or ideas in this post by reporters or other publishers shall make reference to Jack Siegel, author of "Avoiding Trouble While Doing Good, A Guide for the Non-Profit Director and Officer" and this web blog. |
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