Friends of the Strand Theatre, a nonprofit in Rockland, doesn’t have a lot of slack in its budget, which is just what one would expect for a community organization trying to keep the doors open at a nearly century-old theater.

“We run a pretty tight budget,” said Jessie Davis, executive director of the 3-year-old organization.

So complying with a new overtime rule that takes effect in December will mean tighter time management and some money headaches for the organization, which hosts movies, concerts, lectures and other events about 170 times a year.

The new federal rule, unveiled in May, requires overtime pay for salaried workers who earn less than $47,476 a year, more than double the previous ceiling for mandatory time-and-a-half. It applies to both nonprofits and for-profit businesses, and will likely affect an estimated 16,000 workers in Maine.

But that isn’t the only employment change confronting managers seeking to compensate workers fairly and competitively in an increasingly tight labor market. In November, voters will decide whether to approve a $12 per hour minimum wage in Maine by 2020. And several companies, here in Maine and nationally, have decided on their own to increase pay for their lowest-paid employees, starting what could be a chain reaction of wage hikes.

Played against a backdrop of a state unemployment rate of 3.5 percent, these factors are creating uncertainty among business and nonprofit managers, a feeling that’s already heightened in a presidential election year and a wildly swinging stock market.

“I’ve been doing employment law work on the management side for more than 20 years and this is the busiest year for wage and hour issues I’ve ever had,” said Glenn Israel, a lawyer with the Portland-based Bernstein Shur law firm.

OVERTIME THRESHOLD

The Obama administration says the new overtime rule will raise pay for middle-class workers and increase employment if more workers are hired to help companies and nonprofits avoid overtime costs.

For nonprofits, which often operate on tight budgets, it’s expected to be especially vexing. Unlike for-profits, which have some flexibility in passing along increased operating costs to customers, many nonprofits sign contracts with government agencies to deliver services at a fixed price, and they have no option to adjust the contract until it comes up for renewal.

“We’re really just going to have to keep our hours in check,” said Davis, who pointed out that the new rule will primarily affect her and the group’s house manager. The other five paid workers are hourly employees and already earn overtime. The group’s $675,000 annual budget is funded primarily by memberships in the organization and donations.

“It adds an extra element to my job because I don’t know how to just work 40 hours a week,” she said. The theater is generally open seven days a week, particularly in the summer, she said, requiring long hours and six- or seven-day workweeks to manage.

Other nonprofits are wrestling with the same issues.

Officials at the Maine Island Trail Association plan to sit down with affected employees early this fall to discuss the rule changes, said Greg Field, the director of finance and operations for the organization, which provides environmental stewardship on many Maine wild islands.

“We just want to make sure we get it right because it’s a change,” Field said. “We will weigh the needs of the program versus the budget. We need to make sure the work gets done, but also comply with the rules.”

Field said the association has eight year-round paid staff and two seasonal caretakers with an annual budget of about $700,000. They already track workers’ hours, he said, so the new rule will mainly require that overtime costs be managed well.

The Maine Association of Nonprofits quickly responded to multiple inquiries from its membership around the new OT rules and offered a webinar earlier this summer. Fifty organizations signed up, said Mary Erin Casale, spokeswoman for the organization.

Casale said it’s a difficult issue for many nonprofits because many workers are attracted by an organization’s mission as much as the pay or benefits. So they may not mind a little extra time at work here or there and might not be diligent about tracking hours.

“There’s definitely an element of passion for people who do the work,” Casale said. “It’s a balancing act. They still have to be financially solvent. This is about finding compliance and a good culture for your workplace.”

The organization is encouraging nonprofits to put clear policies in place, she said, and tighten up time-management rules. For instance, if an exempt employee spends an hour at night answering emails at home, that’s fine. But if that employee’s status changes, then that type of activity would be restricted. Travel time is also considered work time in many cases.

A survey by the National Council of Nonprofits of its members found widespread confusion about the new rules and concerns among nonprofits because they are going to be implemented right in the middle of many of the contracts with government agencies for some services. The new rules were announced just before the new fiscal years for many nonprofits, giving them only a few weeks to factor in potential OT costs.

Businesses say they, too, have been vexed by the new OT rules.

“We had to make some hard decisions,” said Linda Varrell, the founder of Broadreach Public Relations in Portland.

Varrell said she reclassified some of her nine employees as hourly workers, despite their preferences to be regarded as a salaried employee. Being on a salary is perceived to have a higher status, she said, and makes it easier to adjust schedules to go to a doctor’s appointment or leave early to attend a child’s game or school event.

But other decisions went over well, she said, with some workers getting a boost in pay to push their income above the $47,476 limit.

For instance, she said her company is looking for a client operations manager, a job that had initially come with a salary of about $40,000 a year. That pay will be hiked, she said, to around $50,000 so overtime pay won’t be required,

Varrell has been meeting with her workers one on one to explain the changes and the need to make adjustments because of the new labor rules.

“I’d rather get it done, get it over with and move forward,” she said. “I don’t want it to be ambiguous.”

The state’s Department of Labor has been encouraging employers to assess the status of their exempt salaried workers and make sure they understand that salaried workers have to meet specific duties tests for the jobs they perform. If employers have not been accurately applying the duties test, they could be liable for back overtime for employees.

WAGE SPIKES

Beyond the new OT rules, employers have also been dealing with an increasingly tight labor market. Several national companies, such as Wal-Mart and Starbucks, have increased wages to compete more effectively for new hires.

In Maine, a ballot question to raise the state’s minimum wage from the current $7.50 to $12 per hour by 2020 has prompted opposition by several business organizations who fear the loss of flexibility in managing their companies.

But others are adjusting pay to stabilize an existing workforce and attract new employees.

Maine-based Jackson Laboratory announced last week that it will hike wages for its frontline employees to $15 an hour.

Charles E. Hewett, Jackson Lab’s executive vice president and chief operating officer, said the wage hike – which will affect 43 percent of the nonprofit’s workforce – reflects productivity gains of workers. But he also said it will help with recruiting and retaining workers.

The lab has 250 openings at its sites in three states, and about 60 percent of those openings are in Maine.

He said some of the lower-paid workers leave the lab to work seasonally at restaurants, where they can earn more waiting tables than working with animals in the lab. The company has a policy to allow those workers who left in good standing to return – once.

“Those who stay tend to stay a long time,” he said, and the pay boost will likely increase that tendency.

The lab’s employees “are adding more value than they had before and this was the right thing to do,” he said of the increase. “This will help both recruitment and retentions, but that’s secondary to the fact that they’ve earned it. We are who we hire and that’s true at all levels of the organization.”

The combination of increasing wages and the new OT rules is forcing a lot of organizations to review pay policies and job descriptions, said Israel, the employment law attorney.

“It’s caused quite a stir,” he said.

He said the current lower pay threshold in overtime rules didn’t capture nearly as many employees as the new, higher level will.

It will also require employers to look at job descriptions because there are exemptions from overtime pay for supervisory, administrative or professional employees. But he said the rules mandate specific duties for those jobs to be exempt from the new OT rules.

For instance, a supervisor has to do more than just oversee the work of others. He or she also has to play a role in performance reviews and hiring and firing decisions, Israel said.

Likewise, administrative workers have to exercise “significant professional and independent judgment,” Israel said. Instead of merely applying company policies, he said, those employees must be able to waive and adapt those policies as needed.

“People are saying, I have to make a much deeper dive here” to determine if someone is in a role that exempts him or her from the overtime requirement, Israel said.

Edward D. Murphy can be contacted at 791-6465 or at:

emurphy@pressherald.com

Editor’s note: This story was changed from its original version to clarify overtime exemptions.

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