Nonprofits scramble to adjust to new overtime requirement

A new federal regulation requiring employers to pay workers earning less than $47,476 per year time and a half for overtime could have an outsize impact on the nonprofit sector. Traditionally, many nonprofits have relied on folks who were more interested in following their passion than in earning top dollar or keeping track of hours.

“Pay tends to be a little bit lower than in the for-profit sector, so there are more employees who are below the new salary threshold,” explains David Heinen, vice president for public policy and advocacy at the North Carolina Center for Nonprofits. In addition, he continues, “The average wages in the nonprofit sector here are lower than in the Northeast. The median nonprofit salary is below the new salary threshold in 95 of the state’s 100 counties.”

On Dec. 1, the threshold for exemption from overtime pay will more than double from the current $23,660. Many nonprofits, notes Heinen, “are already operating on a very tight budget,” and most aren’t in a position to raise salaries enough to retain the exemption. Unlike businesses, he points out, “A nonprofit can’t just raise its prices to bring in more revenue.”

And if the rule change triggers layoffs, the economic impact could be considerable. In Buncombe County alone, nonprofits employed 16,196 people in 2013, according to Heinen’s organization. Statewide, nonprofits accounted for 8.8 percent of all jobs in 2012, the U.S. Bureau of Labor Statistics reports.

Loopholes

The new overtime rule aims to “put more money in the pockets of middle-class workers, or give them more free time,” the U.S. Department of Labor’s website explains. But how much it puts local nonprofits behind the eight ball will largely depend on how each one is structured.

For example, The POP Project, an Asheville-based literacy advocacy group, won’t be affected at all, because it’s “100 percent volunteer-led: We don’t make regular time, much less overtime,” says Sarah Giavedoni, the director of volunteers. “Our strategy and mission will continue on as planned.”

And the staff members of the Buncombe County Special Olympics are actually county employees who are provided as an in-kind contribution so that project is also exempt from the change. “I serve as the local coordinator for Buncombe County Special Olympics and do not fall within the regulations,” says Josh O’Conner, the manager of Buncombe County Recreation Services. “We do have several staff that contribute to the overall administration and operation, but I only know of one who might potentially be affected. At this time, I don’t see us making any changes.”

Restructuring the workload

Patrick Fitzsimmons, executive director of Mountain BizWorks, says that despite the challenges, his organization welcomes the change. “As someone who supports people earning a living wage and making good money, I think it’s good — and about time. The old laws were pretty outdated.” At the same time, however, “As a business manager, I also wondered how it will affect my bottom line.”

That concern has led Fitzsimmons to re-evaluate both job descriptions and salaries. “I’ve looked at how I have my staff structured and if there is a way to restructure the organization either to prevent unnecessary costs or to elevate staff to positions with more responsibilities and money,” he says.

Employees’ reactions have mostly been tepid, Fitzsimmons continues. “For them, it’s not a big deal. Either you stay within 40 hours [a week], and we’ll give you overtime, or we’ll adjust their job so they have greater responsibility but higher pay.”

Over at United Way of Asheville and Buncombe County, it’s also mainly business as usual. “We actually have a 37 1/2-hour workweek, so that already gives us a little padding before we hit 40,” says Chief Financial Officer Layton Hower. “We do have hourly workers, but we’ve already been paying them time and a half on the rare occasion they work more than 40 hours a week.”

United Way, says Hower, also favors the new measure. “We think it’s important for people to be paid for the work they do, and we support proper compensation, whether employees work in or out of nonprofits. We believe the law strengthened the financial security of employees in our community, so we’re very supportive of it.”

Pisgah Legal Services, a nonprofit law firm, echoes that sentiment. “I think it’s a great thing that people are getting an opportunity to be paid more and not be taken advantage of,” says Human Resources Director Samantha Galloway, adding that the new rule will have only a minimal effect on her organization. “The majority of our support staff is already paid on an hourly basis, so it didn’t change much for us,” she explains. Starting next month, the law will consider salaried workers making less than the new threshold to be getting paid by the hour. “The other large majority of our staff are attorneys who are exempt from this regulation.”

Cultural shift

Some local nonprofits will face institutional changes, however. The Hendersonville-based Carolina Mountain Land Conservancy has been preparing since the new rule was announced back in May. Julianne Johnson, the nonprofit’s assistant director for operations, says a number of its currently exempt staff will now be subject to the requirement.

“We have staff who do a good bit of work on the weekends — leading volunteer workdays, hikes and outings, events and trainings for the AmeriCorps Project Conserve program run out of our office,” she says. “While these staff have always had the opportunity to take comp days during the week when they have weekend work commitments, scheduling those comp days has been left up to them, and oftentimes, people decide to work longer weeks rather than take the comp time. We will have to change the way staff and supervisors schedule and commit to some projects or activities.”

The conservancy, says Johnson, will simply have to adjust. “It’s going to be a big cultural shift in getting approval for working overtime: We are used to putting in whatever hours it takes to get the work done,” she explains. “We’re always trying to work in the most efficient ways possible and not overload staff, but I think the new rules heighten awareness of what our staff is, and is not, able to take on.”

Johnson hopes increased public support will enable nonprofits to adjust their budgets to accommodate overtime hours. “I think there’s an opportunity to highlight to supporters that their contributions are so vital to the staff being able to carry out the work of the organization,” she points out. “The new rules will squeeze many nonprofit budgets, making general, unrestricted donations and memberships even more important.”

The change will also affect several employees at the Asheville-based Children First. Executive Director Allison Jordan says her organization is absolutely in favor of fair wages for hours worked, but there will be challenges. “We will lose some of the flexibility that we’ve previously given staff,” she foresees. “We often have weekend and night work, taking the children we serve to a ballgame, play or other new experience. In preparation, we’ve had multiple conversations about prioritizing and time management.”

The nonprofit, notes Jordan, will now require written permission for overtime. “We also added language encouraging staff to prioritize the most important work and talk with their supervisor if they feel they’re not able to meet their workload,” she continues.

And like her colleagues, Jordan hopes public awareness of the issue will translate into increased revenue. “There will be additional costs to the organization because of this. I hope that funders realize this and can increase support to all organizations.”

Mission Health, Western North Carolina’s biggest employer, is also preparing for the upcoming change. The nonprofit has more than 9,000 full-time workers across its various campuses, says Richard Holcomb, the director of compensation. “The new regulations will mean changes to compensation for some Mission Health team members,” he reports. “Some will become eligible for overtime, and some will receive pay increases to satisfy the new minimum salary level.” Overall, however, less than 0.2 percent of Mission employees will see changes in pay, says Holcomb.

Paul McDowell, the hospital’s chief financial officer, says patients won’t bear the brunt of the change. “We planned for it, and we reduced costs in other areas to offset this modest increase in compensation costs,” he explains.

Still, notes Holcombe, “One of the biggest challenges will be an adjustment among some team members. … Those who had previously been exempt from overtime will now be required to log hours and attendance in our payroll system. We will support these team members with training because we understand this is a new process for them.”