DOL Issues Opinion Letter Explaining Coverage of FLSA Over Non-Profit Organizations

Today, the Department of Labor issued an Administrator Opinion Letter (FLSA2008-8) from September addressing the FLSA’s enterprise coverage of non-profit organizations. In short, the DOL reminded non-profit employers that the DOL does not consider charitable donations to be “sales made or business done” for purposes of reaching the $500,000 threshold for enterprise coverage. (The threshold under Ohio law is $150,000 under Ohio Revised Code § 4111.03). However, revenue from services provided for a fee to customers/clients which compete with businesses would be counted towards the threshold, as would interest and dividends on investments. The Opinion Letter does not address how grants would be characterized. The DOL also reminded employers that even if the organization is not covered by the FLSA as an enterprise, individual employees may still be covered if – on a non-isolated basis -- they engage in interstate commerce (such as making/receiving interstate telephone calls, shipping materials to another state and/or transporting persons or property to another state). Moreover, organizations covered by Ohio’s minimum wage and overtime statutes are still de facto subject to the white collar exempt status tests under the FLSA because the Ohio statute incorporates them by reference.

As explained in Opinion Letter 2008-8, the FLSA applies to employees of covered enterprises (i.e., enterprise coverage) and to individual employees engaged in interstate commerce (i.e., individual coverage). Enterprise coverage applies to government agencies, hospitals, residential care facilities, schools and colleges, and “enterprises with a business purpose with an annual dollar volume of sales made or business done of $500,000 or more and at least two employees engaged in commerce or the production of goods for commerce.” (In contrast, Ohio Revised Code § 4111.03 provides that “Employer” means the state, political subdivisions, “any individual, partnership, association, corporation, business trust, or any person or group of persons, acting in the interest of an employer in relation to an employee, but does not include an employer whose annual gross volume of sales made for business done is less than one hundred fifty thousand dollars . . . “).

The FLSA and its implementing regulations “are silent” regarding whether charitable donations, service fees, membership dues and dividends and interest earned by a non-profit “should be included as “sales made or business done” in calculating FLSA enterprise coverage. Nonetheless, the DOL explained that enterprise coverage typically does not extend to the charitable, religious, educational or similar activities of non-profit organizations when those activities are not in substantial competition with other businesses. However, “where such organizations engage in ordinary commercial activities, . . . the business activities will be treated under the [FLSA] the same as when they are performed by the ordinary business enterprise.” 20 C.F.R. §779.214. Thus, “[i]ncome from contributions, membership fees, or dues (except any part which represents the value of a benefit, other than of token value, received by the payor), or donations (cash or non-cash) used in the furtherance of eleemosynary activities, does not come within the phrase “sales or business done” in the FLSA. “Services provided for a fee to customers, such as for spaying/neutering or for pet adoption, are provided for a business purpose to the general public in competition with other businesses (pet stores, kennels, etc.) and thus do not qualify as eleemosynary activities.”

Insomniacs can read the full Opinion Letter at http://www.dol.gov/esa/whd/opinion/FLSA/2008/2008_09_29_08_FLSA.htm.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.