In this Issue:
- Maine Nonprofit Organizations and Overtime Rules – Let’s Review
- Form 990 Filing Extension Deadline Changed
- Upcoming Event: Charitable Solicitation Webinar
- E-Bulletin Information
Maine Charitable Organizations and Overtime Rules – Let’s Review
Overtime laws are currently in the news because the U.S. Department of Labor has proposed significantly expanding the number of employees who qualify for overtime pay under the Fair Labor Standards Act. This proposal presents a ripe opportunity to review the overtime laws for Maine charitable organizations, especially because I have encountered much confusion over this topic in recent years.
To begin, everyone should understand that there are two overlapping but distinct overtime laws: the federal law, as set forth in the Fair Labor Standards Act (which also covers federal minimum wage, recordkeeping, and child labor laws), and Maine law, as set forth in the Maine Employment Practices Act. One area in which these two laws differ is in their application to nonprofit charitable organizations. In general, charitable organizations are exempt from the FLSA but are subject to the Maine law. In my experience, many charitable organizations do not realize that they are exempt from the FLSA, and are not familiar with the intricacies of Maine’s overtime law.
The FLSA covers only those charitable organizations that generate annual gross volume of sales made or business done of at least $500,000. Income from contributions, membership fees, grant, dues, and other donations used in the furtherance of charitable activities do not apply toward the $500,000 threshold. Rather, only typically commercial activities fall within this cap. The typical small or mid-sized charitable organization does not have anywhere near this level of commercial activity and thus is exempt from the FLSA. An exception could be if an organization operates a gift shop or provides services in volume for a fee. Although the FLSA is an important law that provides a fundamental set of protections for employees across the nation, it does simplify compliance matters for charities to know that this law does not apply to them. For more on the FLSA charitable exemption, see here. (Note that special rules apply for schools, and faculty members are generally subject to the FLSA.)
In contrast, ever since 2008 the Maine overtime law (as well as the minimum wage law) has contained no exemption for charitable organizations. Maine’s law requires payment of 1 ½ times the regular hourly rate for all hours actually worked in excess of 40 hours in that week. But the law does not apply to a “salaried employee who works in a bona fide executive, administrative or professional capacity” and whose regular compensation , when converted to an annual rate, exceeds the higher of either Maine’s specific threshold or the FLSA threshold. (26 M.R.S. § 663(3)(K))
This language is a bit tricky, so let’s parse it. First, any hourly employee, no matter what their wage rate, is eligible for overtime. But the reverse is not true; only certain salaried employees, and not all of them, are exempt from overtime. To be exempt, a salaried employee must meet two separate conditions: (a) she must work in a “bona fide executive, administrative or professional capacity,” and (b) she must earn more than the Maine or FLSA minimum. The first part of this test tracks the language in the FLSA, and there is federal guidance on what constitutes an “executive, administrative, or professional capacity.” When a new salaried employee is hired or an existing employee changes positions, the organization must determine whether the position meets at least one of these three categories. If not, then the employee must be eligible for overtime.
Now, as for the minimum threshold, because Maine voters in 2016 approved an increase in the state minimum wage to $12 per hour by 2020, the Maine threshold will increase gradually over the next few years from its current $22,500 to $36,000. However, the state threshold will become irrelevant if the U.S. Depart of Labor’s new overtime rule takes effect, because the federal minimum threshold of $47,476 is higher than the state threshold and thus takes precedence. [December 2016 Note: The DOL’s overtime rule is currently suspended from taking effect due to a federal court ruling. The future of the rule is uncertain, depending on how the courts resolve the matter, and given the priorities of the incoming Trump Administration.]
I have seen many Maine charities’ personnel policies that broadly classify any salaried employee as exempt from overtime. This simple treatment does not comply with Maine law, and such organizations risk certain penalties if they fail to pay overtime to a salaried employee who does not fit within an exemption. Finally, Maine law does not allow an employer to substitute comp time for overtime, which comes as a surprise to many employers.
Form 990 Filing Extension Deadline Changed
In a little-notice provision of a transportation bill signed by the President in July, for tax years starting after December 31, 2015, the IRS Form 990 will now have a single automatic 6-month extension period for organizations that use a calendar year as their fiscal year. The current first 3-month automatic extension and additional 3-month discretionary extension has been eliminated. A calendar-year Form 990 filer with an original return due date of May 15 will now have an automatic extension until November 15. To be clear, the extension is automatic but it still must be preserved by filing Form 8868 by May 15. For more information, see http://www.jdsupra.com/legalnews/congress-enacts-new-tax-provisions-that-69587/.
Upcoming Event: Charitable Solicitation Webinar
Date: Tuesday, October 6 at 1:00 – 2:00 PM
Sponsor: Maine Association of Nonprofits
Is your organization soliciting donations in Maine? Does it have the proper license to do so? Join MANP for this informative webinar that will help you ensure that your nonprofit is in compliance with Maine’s Charitable Solicitations Act and laws in other states. Presented by attorney Robert H. Levin.
This Event Will Cover:
- An overview of Maine’s Charitable Solicitations Act
- An explanation of the different licensing categories and filing requirements
- A brief introduction to fundraising in other states
I send the Maine Nonprofit Law E-Bulletin 3 or 4 times per year to provide updates and analysis on legal and policy matters respecting Maine nonprofit organizations. I do my best to keep the messages brief, timely, and useful to nonprofit staff, board members, volunteers, advisors, and donors. At the same time, no one may rely on these E-Bulletins as legal advice, and I encourage you to consult a qualified attorney for advice on any particular situation.
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