Tuesday, December 13, 2016

Overtime Rule Put On Hold by Court

Good morning.
"And the beat goes on................."

According to a post by the National Council of Nonprofits, (confirmed by a post of the Department of Labor here) on November 22, 2016, a Federal District Judge in Texas issued a preliminary injunction blocking the Department of Labor from implementing its Overtime Final Rule (requiring overtime pay to a wider class of employees (including nonprofits) that was to take effect on December 1, 2016.  The Department of Labor has appealed asking for an expedited process, but it's apparently anybody's guess how long before a court will determine if the rule can be implemented.

The rule had the potential to be very detrimental to the financial health of financially struggling nonprofits, who have historically depended on employees to work (in some cases, unreasonable and outrageous) overtime without additional compensation.  Indeed, in the arts, for virtually all arts organizations below the very largest and financially well heeled major institutions, it became almost accepted procedure that many "management" employees (and which employees qualified as "management" was a fairly loose definition) routinely worked far more than the forty hour week.  It was simply part of the way arts nonprofits were able to get the work done, on the budgets they had.

The new rule proposed to redefine which employees had to be paid additional compensation for that overtime work, and, in so doing, dramatically increased that pool of employees.  Unquestionably, this was - from the perspective of fairness to the employees - long overdue.  But it threatened the very existence of many nonprofits who could neither afford to keep every employee, yet couldn't do what they did without them, or at the least put them in a quandary:  layoff employees, raise the salaries of "management" designated employees to keep them as "exempt" from the rule, or cut back on expenses by jettisoning or terminating certain programs and services,  so as to comply with the new rule.  Of course, increasing revenues would be the best option, but also the most problematic.  Rock and a hard place.

As there are now even greater political threats to arts nonprofits, failure to comply with the rule, when implemented, would be a very dangerous thing for any arts nonprofit to even consider.  If you haven't yet determined how you will comply, and taken the steps necessary to be able to activate that plan, you may have caught a break with this court injunction, but I would immediately consult an attorney as to the whole matter if you haven't done so yet.  The rule may need to be re-written and changed, but we don't know that for sure yet.  It may end up less draconian, or it may stay the same.

The above post from the National Council of Nonprofits provides a convenient step-by-step process for determining whether or not your organization is covered by the proposed Overtime Final Rule, how to comply and how much it might cost.  I will assume most arts organizations already had a plan, and a process to implement that plan, to comply with the rule (had it taken effect, as expected, on December 1st).  Because there is a certain level of complexity to understanding and complying with the rule, it is good advice for each organization to consult a local attorney familiar with labor law - both federal and state, for advice; and bear in mind that some states may have stricter requirements for overtime pay than others, or even the federal government.

But for the moment it would appear there is a "stay" in implementation of the federal law rule change, and arts organizations should use the time to again think through how they will handle this challenge, including, if necessary, tweaking their original plans to comply with the rule.  At the above Department of Labor site, you can sign up for email notices as to the status of the rule, and what court action may have been taken.

Have a great week.

Don't Quit