Do the new overtime rules affect homeschool groups?

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The US Department of Labor (DOL) proposed new rules about paying workers overtime. Several people have asked me if homeschool organizations have to follow these new rules.

My answer is that yes, in general, homeschool organization whether nonprofit organizations or for-profit businesses have to follow the rules in the Fair Labor Standards Act (FLSA) regarding minimum wage and overtime.

But occasionally, there are exceptions, so read on!

New Overtime Rules

The new overtime rules were supposed to take effect December 1, 2016. (They been held up by an injunction by a federal judge). The new proposed rules raise the threshold for when an employee is exempt from getting paid overtime. If your employee makes less than $47,476/year, you must pay them overtime at time-and-a-half when they work more than 40 hours a week. The threshold used to be only $23,660/year, so this was a big jump. Under the new proposed rule many more workers are eligible for overtime.

The impact on nonprofits and churches of paying overtime could be huge since many of their employees put in more than 40 hours a week. They work long hours because they are passionate about their mission. Fortunately, the Department of Labor has an exception to the FLSA for nonprofit organizations.

Exceptions to New OT Rule for Nonprofit Organizations

Here’s an except from”Overtime Final Rule and the Non-Profit Sector” a paper from the US Department of Labor available at https://www.dol.gov/sites/default/files/overtime-nonprofit.pdf

the FLSA applies to businesses with annual sales or business of at least $500,000. For a non-profit, enterprise coverage applies only to the activities performed for a business purpose (such as operating a gift shop or providing veterinary services for a fee); it does not apply to the organization’s charitable activities that are not in substantial competition with other businesses. Income from contributions, membership fees, many dues, and donations (cash or non-cash) used for charitable activities are not counted toward the $500,000 threshold.

Let me unpack that for you.

If your nonprofit has less than $500,000 in “business” income (that does not count your contributions, membership fees or dues), then your organization is not covered under FLSA and you do not need to comply with the overtime rules.

Here’s an example from a longer DOL document, “Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act.” available at https://www.dol.gov/whd/overtime/final2016/nonprofit-guidance.pdf

A non-profit animal shelter provides free veterinary care, animal adoption services, and shelter for homeless animals. Even if the shelter takes in over $500,000 in donations in a given year, because the shelter engages only in charitable activities that do not have a business purpose, employees of the animal shelter are not covered on an enterprise basis.

By “not covered on an enterprise basis,” the DoL means the FLSA does not cover the workers and they are not entitled to overtime.

A lot of homeschool nonprofit organizations just breathed a sigh of relief. They rarely have business income and it almost never exceeds $500,000, so they do not have to pay their employees overtime.

Warning: It’s not as simple as it seems!

This issue is not as simple as saying, “My nonprofit doesn’t have $500,000 income, let alone “business” income, so we don’t have to pay any employee overtime.”

I urge you to read the DoL documents I mentioned above and consult with an experienced professional familiar with employee laws and the Fair Labor Standards Act in particular.

The Kentucky Nonprofit Network offers a helpful 9-page report on steps to take if your nonprofit is affected by the new overtime rules (when and if they go into effect).

Carol Topp, CPA

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What’s inside the new Paying Workers in a Homeschool Organization book?

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I’ve updated my book Paying Workers in a Homeschool Organization

It’s got a new cover. It’s grown from 20 to 130 pages, has an index, and a a bunch of sample agreements you can use with your independent contractors.
Here’s what you’ll find inside:

 

Table of Contents

Chapter 1: Can You Pay a Volunteer?

Chapter 2: Paying Board Members and Other Leaders

Chapter 3: Employee or Independent Contractor? Worker Classification

Chapter 4: Guidelines for Hiring Independent Contractors

Chapter 5: Tax Forms for Independent Contractors

Chapter 6: Payroll Taxes for Employers

Chapter 7: Tax Forms for Employers

Chapter 8: Sample Independent Contractor Agreements (I include 5 samples agreements: 3 for teachers, one for a speaker and one for other contractors like a bookkeeper)

Chapter 9: Resources

About the Author

Index

Does any of that sound helpful to your homeschool organization?
The book  in paperback will be available November 1.
The ebook version will be available in a few more weeks.
If you sign up for my email list, you will be sent a coupon code for 20% off the paperback price of $9.95.
Carol Topp, CPA

Parents paying homeschool teachers is getting cumbersome

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Hello Carol,

I am the Executive Director of a 501(c)3 non-profit homeschool co-op. We have always had all parents pay teachers directly for classes. Of course the number of checks written by members each semester,and unraveling the missing/lost checks each semester along with the myriad of other payment mysteries has prompted to us to wonder if we can have all parents submit the teacher payments to our group, then we cut a check to each teacher.

We would essentially gather all the money and then direct it to each teacher. One check from each parent for all their children’s classes, and one check to each teacher for all the classes they are teaching.

Can we do this?

Holly

Holly,

Thank you for contacting me.

Yes, you can collect all the payments from parents and then pay the teachers, but there are some things to warn you about:

1. Managing more money means you need good accounting software (links to some of my blog posts with software recommendations), one that can invoice parents and track who has paid and who still owes.

2. Additionally, since you have a lot more income, you may have crossed an IRS threshold and now need to be filing the annual Form 990 or 990-EZ (YouTube video explaining which form you need to file).

3. Worker classification. You need to determine if the teachers are employees or  Independent Contractors (opens a blog post series on worker status). This is not an easy determination to make. You need to consider many factors.

I’m in the process of updating my book, Paying Workers in a Homeschool Organization. I hope to have it ready by November 1, 2016.

I’ll also be offering a consultation service to help homeschool groups make a decision about employee or independent contractor status.

Sign up for my email list to be notified when the book and worker determination consultations will be available.

Carol Topp, CPA

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Paying Workers update will be available November 1

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I’m working hard at getting my book Paying Workers in a Homeschool Organization updated. It’s grown from a 20 page ebook, to a 130 page paperback (ebook version will be available soon as well).

Here’s the Table of Contents:

Chapter 1: Can You Pay a Volunteer?
Chapter 2: Paying Board Members and Other Leaders
Chapter 3: Employee or Independent Contractor? Worker Classification
Chapter 4: Guidelines for Hiring Independent Contractors
Chapter 5: Tax Forms for Independent Contractors
Chapter 6: Payroll Taxes for Employers
Chapter 7: Tax Forms for Employers
Chapter 8: Sample Independent Contractor Agreements
Chapter 9: Resources

 

The book is in the editing phase now and I hope it will be ready for sale by November 1st, 2016.

I know that can’t happen quickly enough for some of you! Just this week I received two emails from homeschool leaders asking if they are paying their teachers correctly.

I will also be offering a service to help assist homeschool leaders to make worker determinations. It will be a phone consultation followed up my helpful guidance on the next steps to take.

Be sure to sign up for my email list so you will be notified when the book is ready and when I will be offering worker determination consultations.

Carol Topp, CPA