Q: I run a nonprofit organization. We pay our managers a salary, but most of them do not meet the new salary basis requirements published by the Department of Labor. What do I do?
A: Depending on the details of your organization, as well as the details of the work performed by your employees, the Fair Labor Standards Act (FLSA) may or may not apply.
In general, nonprofit organizations are not covered as enterprises under the FLSA unless they engage in ordinary commercial activities that result in sales made or business done that meets the $500,000 threshold. Ordinary commercial activities are activities such as operating a business, like a gift shop.
Activities that are charitable in nature, however, are not considered ordinary commercial activities, and do not establish enterprise coverage. Examples of activities that are charitable in nature and normally provided free of charge include the following:
- providing temporary shelter;
- providing clothing or food to homeless persons;
- providing sexual assault, domestic violence, or other hotline counseling services; and
- providing disaster relief provisions.
Similarly, income received or used for a charitable purpose does not count toward the $500,000 threshold – this includes income from fundraisers, donations, grants, and in-kind gifts. However, funds received in exchange for services provided or goods sold do count toward this threshold.
While many nonprofits will find they are not covered as an enterprise under this test, the analysis does not end here.
Regardless of commercial activities, certain nonprofits are specifically identified as covered under the FLSA – these include most educational institutions, preschools, hospitals, and institutions primarily engaged in the care of older adults or people with disabilities who reside on the premises.
Also, individual employees may be covered under the FLSA even if the organization as a whole is not. As a general rule, an employee who engages in the movement of persons or things across state lines, or in the production of goods for interstate commerce is covered by the FLSA. Examples of activities which could trigger individual coverage under the FLSA include:
- making out-of-state phone calls;
- receiving/sending interstate mail or electronic communications;
- ordering or receiving goods from an out-of-state supplier; and
- handling credit card transactions or performing the accounting or bookkeeping for such activities.
Bottom line, the best course of action for every nonprofit organization concerned about FLSA compliance is to engage in an individual analysis of the employees within its workforce. For more information and assistance in this process, please contact a member of the Rhoades McKee Human Resource and Employment Law Team.
HR in Focus is a blog provided for informational purposes only and does not constitute legal advice. Employers are welcome to submit questions for consideration on the blog, however, submission of a question or the posting of any response to a question does not create an attorney-client relationship with Rhoades McKee. Employers with specific issues or questions about the law should seek the assistance of an attorney.
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