In April 2024, the DOL issued a final rule increasing the standard salary level for executive, administrative, and professional (EAP) exemptions under the Fair Labor Standards Act (FLSA). This final rule provides for current and future updates of the salary thresholds, as follows::
- As of July 1, 2024, the standard minimum salary level for exempt workers increased from $684 per week ($35,568 per year) to $844 per week ($43,888 annually).
- On January 1, 2025, the minimum salary level will increase again, to $1,128 per week ($58,656 per year).
- Starting July 1, 2027, and every 3 years thereafter, the minimum salary level will be determined by the methodology used to set the salary level in effect at the time of the update, through the application of available data. The highly compensated employee (HCE) threshold will also increase on the same schedule.
- The standard salary minimum for HCEs increased to $132,964 annually. This category in the regulations exempts employees from overtime if their total annual compensation exceeds a salary threshold level and they customarily and regularly perform at least one of the exempt duties or responsibilities of an executive, administrative, or professional employee.
The DOL has made it clear in the final rule that the goal is to give more workers pay for valuable time back with their families and provide regular updates to ensure predictability and protect against future erosion of overtime protections. And, while these rule changes apply to most sectors, the industries that will be hit hardest financially are those where salaries are lower than the new threshold, such as retail, hospitality, and nonprofits.
How to Avoid Potential Problems Unique to Non-Profit Employers
It is clear that changes to the standard minimum salary threshold will bring many more challenges to already resource-constrained nonprofits. The most important actions nonprofits are taking are to determine the overall impact on culture, operations, resources, staffing, and, above all, service to communities or constituent groups in need.
Non-Profits should consider the following actions:
1. Educate funders and grantors
Many grants are written with salaries included as cost. With these changes, funders and grantors need to be aware that the cost of labor is going up and most nonprofits are unable to absorb those costs on their own. Start having these conversations now so contingencies can be made.
2. Use volunteers
Nonprofits can work with various sister organizations to pool volunteers from their staff collectively to spread out tasks during external meetings. Consider ways to include volunteers from universities, student and member chapters, or other organizations to create a symbiotic relationship.
As long as the work is truly “volunteer” and not the actual work of a full-time employee, this may be a way to add resources to a nonprofit’s meetings. And remember, employees should never be permitted to volunteer “off the clock”.
3. Prioritize mission-critical tasks
Now is the time to think about what work is most urgent. Often, not everything an organization does is absolutely mission-critical and identifying the most crucial tasks now will spark a planning process to relentlessly focus resources based on the highest-priority needs.
4. Review policies
Focus on reviewing and updating policies that are affected by this change. Consider implementing a policy that requires employees to have approval from their manager prior to working overtime hours as a way to manage the cost.
We understand these are just a few of the possible challenges coming down the pike. For now, many of our non-profit clients are having us review their positions for proper FLSA classification as a start. The key is to begin your analysis now, clearly understand the changes coming, and brainstorm ways to maintain your organization’s mission in the face of additional resource constraints.
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