Proposed Overtime Changes May Strain Some Nonprofit Budgets

A proposed federal rule change on overtime pay may cut into the budgets of some nonprofits and may even force some to curtail mission-critical work.

The change would extend overtime benefits to employees who make up to $50,440 a year — more than double the current income threshold. President Obama has also proposed changing who might be exempt from the rule, which could increase the number of workers who qualify for overtime pay.

Currently, federal rules mandate that hourly and salaried nonexempt employees who earn less than $23,660 be paid 150 percent of their wage rate for any time on the job that exceeds 40 hours a week. Exempt employees typically are white-collar professionals; nonexempt workers are often manual laborers, administrative support staff, and service workers.

Lisa Brown Morton, president of Nonprofit HR, a consulting firm, predicts that organizations with large numbers of “frontline” service staff will be most affected. She said the change could also affect nonprofits that pay salaries using grants that don’t allow for overtime pay.

The National Council of Nonprofits said that the change could affect millions of nonprofit workers. It’s encouraging its members to “conduct a mission-based analysis” of the rule change’s potential effects.

Several nonprofits, including national affiliate-driven groups, such as YMCA and Goodwill, said they’re studying the proposal.

Jim LeBlanc, president of Volunteers of America Greater New Orleans, said that the proposal is good in theory but would strain his organization’s budget. He estimates that between 80 and 100 of his 550 employees would be affected.

“I’m gonna have to say, ‘I love you and I love all that you do, but you can’t work over 40 hours because I can’t pay time and a half,’ ” he said.

Mr. LeBlanc said that limiting hours will dishearten his staff members, some of whom are accustomed to working long hours to serve clients. “They’re going to say, ‘People need our help.’ And ‘I’m going to say, ‘You have to clock off at 5 o’clock.’ From a nonprofit perspective, that’s just not how we operate. If there’s something that needs to be done for someone, people just do whatever it takes.”

Ultimately, Mr. LeBlanc worries that work-hour cutbacks will interfere with his organization’s mission. “I think at the end of the day, it’s going to mean services to people in need are going to suffer,” he said.

Not everyone is so pessimistic.

Lisa Rusyniak, president of Goodwill Industries of the Chesapeake, said she anticipates the rule change would affect only about six entry-level managers out of a staff of 800. “At this point, it doesn’t appear that it’s going to be a burden for us,” she said.

Tougher Enforcement?

The new attention to overtime-pay issues raises the question of whether the federal government will do more to enforce worker protections. Some organizations are skirting the overtime rules, Ms. Morton said, as groups have a “tendency to classify as many employees as possible as exempt from overtime provisions, even when they shouldn’t.”

Michael Curtin Jr., chief executive of D.C. Central Kitchen, echoed the concern. His organization supports the proposed changes because fair wages fit within its mission, Mr. Curtin said. But he adds that while D.C. Central Kitchen carefully manages overtime hours, others don’t.

“It is not uncommon for nonprofit employees to be incorrectly designated as salaried, masking the incredible workloads assigned to them,” he said in a statement. “Our sector’s desire to do more with less has discouraged nonprofits from investing in both the people required to accomplish their goals and the systems required to manage those people.”

The federal government is soliciting public comments on the proposed changes until September 4.