The Foraker Group

The Council has issued the following advice to organizations that face increased costs from the FLSA Overtime Final Rule.

How is a nonprofit going to maintain the same level of services to the public pursuant to government grants and contracts when its costs are likely to go up when it implements the Overtime Final Rule but its reimbursement rate is not? The Labor Department, in its materials explaining the change in employment rules, seemed to acknowledge the challenge for “organizations for which some or a significant amount of funding comes from government or private grants of set amounts.” The Labor Department has offered assurances that future grants and contracts from that federal agency will adjust reimbursement rates to recognize the new overtime requirements. It was also revealed at a congressional hearing last week that National Research Service Award grants from the National Institutes of Health reportedly will pay above the new salary threshold for college and university research activities. Other federal departments and agencies may announce relief for future, and perhaps current, grants and contracts, but so far no clear path has emerged to identify tools or procedures to follow, and relief will still be needed for non-federal government grants and contracts. In the meantime, the Venable law firm recommends that nonprofits with government grants and contracts “reach out to their grants and/or contracting officer as soon as possible to determine how the nonprofit can formally modify the grant and/or contract budget to account for these new costs.” The advice continues with the reminder that “any increase should be reflected in a formal modification to ensure that the federal government acknowledges the increase, or corresponding limitation in scope, and does not result in an adverse response by the government.”

We will continue to monitor information from the Council and pass it along as soon as we receive it. If you have questions about ways the rule may affect you, please contact Mike Walsh at mwalsh@forakergroup.org.