DOL’s Proposed Overtime Rule Would Hurt Nonprofit Sector, Coalition Says

ASAE joined a broad coalition of almost 90 associations in sending a letter to Congress this week urging the Department of Labor (DOL) to reconsider its proposed rule that would make 3.6 million additional U.S. workers eligible for overtime pay.

Under the federal Fair Labor Standards Act (FLSA), employees are entitled to receive premium overtime pay when they work over 40 hours per week, unless the employee is considered exempt from these requirements. Employees whose primary duties fall under the executive, administrative and professional (EAP) exemption, who are paid on a salary basis, and whose compensation meets the minimum salary level are exempt from overtime requirements.

The Biden administration’s proposed rule would require employers to pay overtime to so-called white collar workers who make less than about $60,000 per year. That’s up considerably from the current threshold set in 2019 during the Trump administration of $35,568. This issue is especially important to associations because many, if not most, association employees hold roles that qualify them as exempt from overtime, provided the salary basis and salary level tests are met.

ASAE believes that the reclassifications resulting from a higher minimum salary could harm currently exempt junior and mid-level employees who would have to be reclassified from salaried professionals to hourly wage earners, due to the need for nonprofit associations to control overtime costs. Currently, associations provide exempt employees opportunities to participate in work experiences designed primarily to provide them professional growth or to develop connections within their chosen field, but many associations will no longer be able to afford to do so. Nonexempt employees often have more limited workplace flexibility options due to the need to track hours and limit overtime.

The coalition letter was organized by the Partnership to Protect Workplace Opportunity (PPWO), and asserts that DOL is rushing to enact overtime rule changes without evidence that the current regulations adopted in 2019 are failing to protect employees.

DOL is providing only 60 days to comment on the proposed rulemaking, and PPWO estimates the changes could be effective as early as May 1, 2024.

“If finalized, the proposal will dramatically and negatively impact businesses, nonprofits, colleges and universities, states, cities, towns and public schools as well as the workers they employ and the consumers, students and people they serve,” the PPWO coalition letter states. “Moreover, the costs and organizational changes required to comply with the proposal could immediately destabilize an economy that is already facing the dual threats of inflation and recession.”

DOL’s proposed rule change would raise the salary threshold to the 35th percentile of average weekly earnings of full-time salaried workers in the lowest-wage Census Region. ASAE’s Board-approved position statement on overtime pay advocates for no higher than the 25th percentile. ASAE also calls for new regulations on the calculation of overtime compensation for nonprofit sector employees. As an exception to the current regulations that require that overtime be calculated exclusively on a workweek basis, ASAE proposes that nonprofit employers could have the option to select a biweekly overtime calculation, in which overtime premium pay would be due for any hours worked above 80 in a two-week period. This recognizes that nonprofit sector work is often variable, rather than fitting neatly into a Monday through Friday workweek. Under a biweekly calculation approach, nonprofit employers and employees would have the flexibility to balance workloads, offsetting longer workweeks with time off within a two-week period.

ASAE urges you to review the proposed rule and contact ASAE Public Policy team at publicpolicy@asaecenter.org if you believe they will impact your organization. ASAE will gather specific examples of how its members’ associations might be impacted by changes to the current rule, which will be incorporated into our comments on DOL’s proposed rulemaking. The deadline for comments is November 7, 2023. View more.