I was having lunch the other day with a colleague who practices non-profit law in Minnesota. As is often the case, we chat about issues facing our clients. Naturally, we started talking about whether not-for-profit entities are subject to the Fair Labor Standards Act (FLSA). The answer is that it depends on whether the entity is “covered”, or the individual is “covered”. In other words, there is no exemption for non-profit employers and whether the entity is covered is the same as any for-profit entity. Indeed, the Department of Labor’s (DOL) updated regulations apply to for-profit and not-for-profit entities alike. In fact, on May 18, 2016, the DOL published its Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act. In addition, it published another handout, Overtime Final Rule and the Non-Profit Sector.
Can A Charitable Organization Not Be A Covered Enterprise?
Sure. In order for your organization to be covered, it must have annual revenues (sales made or business done) over $500,000. Unless your organization is engaging in “ordinary commercial activities” (such as a gift shop), with sales in excess of $500,000, it is not covered (keep reading though, because this does not mean the FLSA does not apply to your employees). When determining enterprise coverage, the DOL will look to see if the non-profit is engaging in activities “for a business purpose” as opposed to, for example, activities that are charitable such as providing clothing, food, temporary shelter, hotline counseling services, and the like. That being said, income used to further the charitable activities such as contributions, donations, membership fees and dues (with some limitations) is not included in the $500,000 threshold.
Can An Employee of A Charitable Organization Be Covered Individually?
Yes. This will happen when an employee’s work activities are regularly engaging in interstate commerce – which is almost always given our connected society (email across state lines, phone calls out-of-state, credit card transactions, etc.). That being said, the DOL has stated in its guidance that it is not going to use its resources to find that needle in a haystack, but will look more to whether an enterprise is covered. It seems the DOL does have a weakness for charitable organizations…but I wouldn’t bank on it.
How Does the FLSA Overtime Regulations Apply to Your Non-Profit?
If you get to join the FLSA club, the DOL’s regulations apply just as they would if you were a for-profit entity. Accordingly, you can find out more information in my earlier posts, the one summarizing the overtime overhaul can be found here. In short, you will need to pay minimum wage plus overtime unless your employees meet one of the white-collar or other stated exemptions.
What About Volunteers?
Individuals generally cannot “volunteer” for a commercial activity (such as working in the gift shop). These rules have not changed with the revised overtime regulations. A volunteer is one who volunteers freely for a non-profit for public service, etc. without expecting compensation. If the individual is a full-time “volunteer”, you should look carefully to be sure that the individual is not crossing the line displacing work of an employee (typically volunteers are part-time). Similarly, a paid employee should not be allowed to “volunteer” for the same non-profit in the same capacity as the work the employee is paid for. In short, if the volunteer is an integral part of the organization, you may want to take a second look at the classification of the employee and/or conduct an internal audit of your wage and hour practices. Finally, don’t forget about Minnesota wage and hour laws…just because the FLSA may not apply, does not mean that Minnesota law does not provide employees certain protections (yes, that’s another blog for another day!).