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Policy Update: Overtime Salary Rule Changes

Policy Update: Overtime Salary Rule Changes

Nonprofit Connect wants to inform you of proposed changes to public policy that could affect your organization.

Overtime Salary Rule Changes
Last Thursday, the U.S. Department of Labor released proposed changes to the overtime salary threshold rule, which falls under the jurisdiction of the Fair Labor Standards Act. The proposal itself is 219 pages long, so we have included below a summary from the National Council of Nonprofits. You can also read today’s Washington Post article, which includes a summary of the proposed changes, as well as some history for the rule.

Summary by the Numbers

  • $679 per week ($35,308/year) salary threshold proposed. That's up from the current $455/week ($23,660/year) threshold and less than the Obama Administration proposal in 2016 of $955/week ($47,476/year) that was blocked by the courts. Additionally, the proposed rate is almost exactly halfway between current law and the Obama proposal.
  • $147,414 per year would be the new salary threshold for Highly Compensated Employees (HCE). That would be raised from the current HCE level of $100,000 and higher even than the Obama proposal of $134,004. The reason for the higher rate is that the Labor Department is proposing to use the same escalator formula that the Obama Administration intended to use - setting the rate at 90th percentile of full-time salaried workers nationally. To be exempt from overtime, highly compensated employees must satisfy part, but not all of the duties test for their classification, i.e, executive, administrative, or professional.

Current Overtime Rule Guidelines
The way the law is currently structured, for a worker to be exempt from federal overtime compensation beyond the standard 40-hour workweek, there are three criteria that must be met:
  1. Each employee must be paid above a minimum salary range,
  2. They must be paid by a salary rate rather than an hourly rate, and
  3. Their work must include tasks related to executive, administrative, or professional employment.

There are some unique exceptions for certain careers, but this is the standard for the majority of our sector.

Next Steps
The Labor Department estimates that approximately seven percent of nonprofit employees will be affected by the changes, which is in contrast to approximately five percent of for-profit employees. Once the Department of Labor publishes the rule in the Federal Register, the public will have 60 days to submit comments for consideration. To read the original rule and to submit comments once the public period opens, click here. If you’d like to read the National Council’s analysis of the proposed rule changes, click here.

Nonprofit Connect will send another communication once that public period for comment has been opened.

To learn more about Nonprofit Connect's advocacy education efforts, please visit our Advocacy resources page.

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