Understanding the Fair Labor Standards Act and the Equal Pay Act
Do you understand your nonprofit's obligations under the Fair Labor Standards Act and Equal Pay Act? Here's a primer on the basics.
Fair Labor Standards Act
The Fair Labor Standards Act guarantees a minimum wage and overtime pay for many workers in the United States. Managed by the U.S. Department of Labor, the Fair Labor Standards Act is meant to protect workers from being exploited or abused on the job.
Not all nonprofits are subject to the Fair Labor Standards Act, however. Coverage is usually determined by a "yes" answer to one of the two following questions:
- Is your nonprofit considered a covered enterprise? Nonprofits that earn $500,000 or more a year from sales, fee-for-service or other business are subject to the Fair Labor Standards Act. In this case, the meaning of the word "business" is key to the definition. The $500,000 income must be earned from actual business — such as revenue from a museum gift shop — and not from charitable activities while delivering your mission. Some nonprofits are covered enterprises based on their organization type, including hospitals and schools.
- Are any of your employees individually covered? Individual employees may be covered by the Fair Labor Standards Act if they're engaged in interstate commerce, whether traveling across state lines for work, making interstate phone calls or producing goods to be sold in another state.
Any nonprofit that fits either of these criteria must abide by the regulations outlined in the Fair Labor Standards Act — including paying hourly employees minimum wage and overtime. In addition, a proposed federal rule under the Fair Labor Standards Act called the Overtime Final Rule would extend overtime pay to millions of additional workers.
Equal Pay Act
The Equal Pay Act was amended to the Fair Labor Standards Act in 1963. It was the first piece of modern civil rights legislation. Any employer who has more than 15 employees and any employee working in an executive capacity — whether for a nonprofit or for-profit organization — must comply with the Equal Pay Act, which is enforced by the U.S. Equal Employment Opportunity Commission (EEOC).
The Equal Pay Act has an extremely narrow focus, prohibiting wage discrimination based only on sex — not race, color, religion, national origin, age or disability.
Under the Equal Pay Act, men and women doing the same or similar work can't be paid unequal wages. Note that jobs don't have to be exactly the same to fall under this requirement. If they require equal skill, effort and responsibility and are performed under similar working conditions within the same establishment, then wages must be equal. Unequal compensation can be justified only if due to seniority, merit, quantity or a factor other than sex. These are known as affirmative defenses, meaning that it's up to the employer to prove that they apply.
The Equal Pay Act also protects employees who report sex discrimination or assist in investigations of such discrimination, making it illegal to retaliate against anyone who reports discrimination — such as by firing them or reducing their salary.
The Fair Labor Standards Act and the Equal Pay Act aside, it's against federal law for employers to discriminate based on sex. Acts of discrimination and retaliation in any organization are illegal and subject to investigation by the EEOC or the U.S. Department of Labor.
This article draws on the expertise of Grace Davies, a Minneapolis-based attorney with special interest in product liability, medical malpractice and employment discrimination.
U.S. Department of Labor: Guidance for non-profit organizations on paying overtime under the Fair Labor Standards Act (2016)
U.S. Department of Labor: Fact sheet #14A: Non-profit organizations and the Fair Labor Standards Act (FLSA) (2015)
U.S. Equal Employment Opportunity Commission: Facts about equal pay and compensation discrimination
U.S. Equal Employment Opportunity Commission: The Equal Pay Act of 1963
U.S. Equal Employment Opportunity Commission: Laws enforced by EEOC