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Beware the Hardworking and Conscientious Employee

Overtime Concerns for Nonprofits

The best of intentions can cause unintended problems. Most people who choose to work at nonprofits do so for the sense of purpose and mission. These employees are often willing to volunteer their time or go the extra mile without being asked. Unfortunately, the employees’ willingness to go above and beyond without being asked can have serious unintended consequences for the nonprofit by violating state and federal wage and overtime laws.

All employers are potentially subject to both the federal Fair Labor Standards Act (FLSA) and the laws of every state where their employees work. Many nonprofits may be broadly exempt from much of the federal FLSA, but find employees are covered unexpectedly by state laws or individually under the federal law. Each state is different, offering its own unique rules, requirements, and exceptions. It is not uncommon for a federally exempt employee to be non-exempt under state law. These laws are designed to protect employees who may lack significant bargaining power and cannot be waived by employees. It is the employer’s obligation and burden to ensure that all hours worked are properly documented and an employee’s failure to report is usually not a defense. If the employer had any hint extra hours were worked or failed to make reasonable efforts to discover hours actually worked, liability may exist.

When does the Fair Labor Standards Act apply?

The federal FLSA can apply to employers in one of two ways. First, it can apply on an enterprise basis to all employees if the nonprofits annual gross volume of sales or business done exceeds $500,000 and it is engaged in interstate commerce. Charitable donations and fundraising are generally not treated as sales, however, and many nonprofits will not meet this threshold.

The federal FLSA can also apply to individual employees. The federal FLSA applies to any employee engaged in interstate commerce or in the production of goods for interstate commerce regardless of the nonprofits sales volume. This test is easy to meet. Common work activities that may meet this definition are making out-of-state phone calls, responding to out-of-state emails, ordering goods from an out-of-state supplier, travelling out-of-state, and handling credit card transactions or accounting for those activities.

The Minnesota FLSA applies the definition of employer broadly to “any individual, partnership, association, corporation, business trust, or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee” subject to certain specific statutory exceptions. Thus, the Minnesota FLSA usually applies to all  employees unless an exception applies.

The Wisconsin FLSA equivalent laws apply a broad definition for minimum wage purposes, but usually limit overtime regulations  to “mercantile” and commercial businesses and state and local government. Wisconsin overtime regulations generally do not apply to nonprofit organizations because they are not a “mercantilebusiness.

How does all of this apply to nonprofit organizations in Minnesota and Wisconsin?

If the federal FLSA applies, nonexempt employees are entitled to federal minimum wage and overtime pay after 40 hours a week.

If a nonprofit operates in Minnesota, its employees are most likely covered by the Minnesota FLSA, subject to specific narrow statutory exceptions. Unlike federal law, if only the Minnesota law applies, overtime generally starts after 48 hours each week.

If a nonprofit operates only in Wisconsin, Wisconsin’s minimum wage laws apply broadly, much like Minnesota, but Wisconsin’s overtime rules likely do not—unless the nonprofit also sells goods and services.

Specific exceptions may apply to all of these and they may be counter intuitive or anachronistic. For example, Wisconsin has a specific statutory clause addressing corporations engaged in the processing of cucumbers into pickles.

Covered Employees who Volunteer

Covered employees who also volunteer are a particularly thorny issue. Only time spent voluntarily performing activities outside of the employee’s normal scope and outside of the employee’s normal working hours can count as hours not worked. For example, if the employee is a nurse at the clinic during the week, that employee may need to be paid normal wage and overtime if they volunteer as a nurse at an employer-sponsored blood drive on the weekend. If the employee is required to volunteer, then the time is considered work. An employee cannot volunteer the last hour of their shift each day, nor can they volunteer to answer work calls when they are away from the office. If it looks like a duck, walks like a duck, it’s probably a duck.

Watch for local ordinances that may impact your nonprofit as well.

In addition to state and federal laws, many cities are jumping on the wage-and-hour regulation bandwagon. For example, in Minneapolis has the Minimum Wage Ordinance setting the hourly minimum wage for small employers (100 employees or fewer) at $10.25 and the hourly wage for large employers (more than 100 employees) at $11.25. This exceeds State and Federal Minimum Wages and the exact scope of the ordinances is still being resolved.

What about salaried employees?

The fact that an employee agrees to be paid a salary has no direct impact on the application of overtime rules. There are many and varied exceptions, but they are specific and beyond the scope of this article.  As a general rule, you should assume no exception applies unless you are certain you know which exception does apply.

What if my employee wants to work beyond their 40 hours without additional compensation?

Consent is not a defense to violating the FLSA.

The Employer’s Duty to Ensure Compliance

It bears repeating that it is an employer’s duty to identify, record, and pay an employee for all hours worked. While it may seem unusual, employees often fail to report hours and think it’s just part of doing a good job. For example, many employees may think it is okay to stay a little later to help a client or finish a major project without reporting it on their time cards and they do not mind “volunteering” a few extra hours to do a good job and get the job done.  Activities that seem innocuous, like an employee staying a little late, eating at their desk, or sending e-mails outside of normal work hours are red flags that should be investigated and corrected—either by ensuring it doesn’t happen or by ensuring that all hours are reported.

In short, as with all regulations, it is important to be proactive, understand the risks, address them up front, and remember that state law can apply even where federal law does not.

*** DISCLAIMER:  This article should not be deemed legal advice. You should always consult with an attorney about your specific circumstances and legal rights and obligations. ***


Tom Witt is an attorney with Fryberger, Buchanan, Smith & Frederick, P.A., practicing in the areas of Litigation, Employment Law, and Family Law. Thomas Witt is an associate attorney with Fryberger, Buchanan, Smith & Frederick, P.A., in Duluth, MN.  This article was co-authored with Adam Sullivan, a recent J.D. graduate from the University of Minnesota.