The New Overtime Rules Spotlight a Systemic Problem for Nonprofits

Once the Department of Labor issued its new rules raising the threshold for overtime eligibility for exempt staff, many nonprofits faced the challenge of determining their organizational response. At the simplest level, this was just another budget challenge to be answered. But below the surface, the Department of Labor’s act forced the nonprofit community to confront the ethics and wisdom of organizational models and cultures that expect staff to work long hours and make personal sacrifices with little economic reward in return.

Moving the threshold from $23,600 to $47,476 will make at least 4.2 million workers eligible for overtime when the change becomes effective on December 1st. Employers have many ways they can respond, each with a cost. Some will make no changes to their workforce or work schedules, project the number of overtime hours they will face, and prepare to write larger payroll checks. Others will decide it is easier to raise the salaries of some of their exempt employees above the new threshold and make no changes in assignments or schedules. Still others will impose tighter controls on their staff schedules to eliminate the potential for overtime and accept they may have to get less work accomplished each week. Lastly, some may choose to add part-time employees so that output remains the same rather than pay their current staff for overtime. The cost of each path is a combination of new personnel expenses, changes in how the work is actually done, and alterations to organizational culture.

At this basic, balance-the-budget level, nonprofit organizations have seen the new rules as uniquely challenging. U.S. Public Interest Research Group’s executive director, Andre Delattre, spoke for many nonprofit leaders when he said:

Organizations like ours rely on small donations from individuals to pay the bills. We can’t expect those individuals to double the amount they donate. Rather, to cover higher staffing costs forced upon us under the rule, we will be forced to hire fewer staff and limit the hours those staff can work—all while the well-funded special interests that we’re up against will simply spend more.

Unlike for-profit organizations, nonprofits often don’t have the option of raising prices to offset new costs. Government-funded services are governed by tightly drawn contracts that cannot typically be reopened to adjust for new costs from new requirements. Private funders, too, may be unwilling to increase their gifts to accommodate the new cost of accomplishing the nonprofit’s mission. Painfully, for many purpose-driven organizations, the only option may be to reduce service and cut programming.

The new rules have also exposed a more fundamental problem with nonprofit labor practices. Jonathan Timm recently observed in the Atlantic that the responses from many of those speaking for the nonprofit sector reveal “a gap between the values that many nonprofits hold and the way they treat their own staffs.”

There’s no doubt that nonprofits today face serious financial difficulties and constraints, but do they have no choice but to demand long, unpaid hours of their employees? 

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By Martin Levine | Nonprofit Quarterly | August 24, 2016

The Center for Nonprofit Excellence will be hosting a training about the new overtime regulations on September 22 from 8:30am-11:30am. Register here

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