As advocates, we tend to focus on – well? Advocating. But every now and then, the U.S. Department of Labor (DOL) makes a decision that impacts what rules we must follow – and that impacts how we can advocate.

In April 2024, the DOL shared a new set of rules that are now part of the Fair Labor Standards Act (FLSA). The FLSA determines everything from overtime pay to recordkeeping. 

Incorporating the law into our budgets, hiring processes and operations plans is critical. That’s why we’re sharing more about the new FLSA overtime rules – and what they mean for nonprofits – below. 

What’s happening? 

In April, the DOL shared that they’re updating FLSA rules, with a specific focus on overtime compensation. The rules focus on who gets overtime pay and when they should get this pay. These rules also impact things like nonprofit financial recordkeeping. 

What do these rules *actually* mean for us? 

Here are the (extremely simplified) key takeaways for nonprofit leaders. Nonprofits may need to: 

• Pay more employees for overtime work. The updated FLSA overtime rules mean that starting in January 2025, most employees who earn less than $58,656 will be entitled to overtime pay. The first phase – impacting nonprofit professionals who make $43,888 or less per year – went into effect on July 1. 
• Change who they classify as a “highly compensated employee”. Before the rule, a nonprofit professional who made $107,432 annually was considered highly paid. Starting in July, that number increased to $132,964. In January 2025, it will increase again – this time to $151,164. 
• Update recordkeeping. To comply with the new rules, nonprofits need to know how many hours employees are working – so they know who to pay overtime and how much to pay. Many nonprofits will have to update recordkeeping to comply with these rules. 
• Take a close look at budgets and financial planning for 2025 and beyond. Now that overtime and compensation rules are changing, many nonprofits will end up paying employees more than they have in the past. It’s important to incorporate these new expenditures into budget plans. 

*These rules apply mostly to salaried, exempt team members and highly compensated professionals, but do include exceptions.

Who do the rules impact? 

Because of North Carolina’s state laws, this rule impacts nearly all nonprofits in the state. The North Carolina Center for Nonprofits stated that “North Carolina nonprofits – particularly those operating in rural parts of the state – are likely to be disproportionately impacted by a higher salary threshold.”

Will these rules change? 

Likely not – but definitely not for a while. Businesses and advocates are already challenging the new rules, such as launching lawsuits in Texas. BUT even if there are additional federal (or North Carolina specific) lawsuits, the legal proceedings would likely take months. Nonprofit experts recommend moving forward assuming the rule changes will go into effect. 

We’re also in an election year. Who we choose as our next president may impact these rules.

When does it all go into effect? 

• The first phase – impacting overtime for nonprofit professionals who make $43,888 or less per year – went into effect on July 1. 
• The second phase – impacting overtime for nonprofit professionals who make $58,656 or less per year – is going into effect on January 1, 2025. 

I want to read more about this – where can I go for more info? 

You can read more about the new rules through the North Carolina Center for Nonprofits’ deep dive article! This article includes tips on next steps, too. 

*At John Rex Endowment, we aren’t legal, finance or HR experts, and we don’t provide counsel related to these topics! We recommend working with legal, finance and HR experts to update your nonprofit practices as needed to address these changes.