Many nonprofits are technically not subject to federal Fair Labor Standards Act (“FLSA”) wage and hour law requirements due to rules that limit FLSA applicability to organizations that meet certain “enterprise coverage” or “individual coverage” thresholds. However, this is often a moot point since nonprofits are usually subject to state wage and hour laws, many of which are built upon federal FLSA definitions and exemptions. Consequently, most nonprofits must monitor changes in federal FLSA rules carefully as these may have state law compliance implications.

As discussed in Q&A #108, paid interns usually must be treated as employees. Whether a particular employee is required to be offered coverage under an organization’s group health insurance plan is determined first and foremost by the eligibility rules set forth in the plan document and summary plan description (SPD). For small-staffed organizations that do not meet the definition of an “applicable large employer” under the Affordable Care Act, the main consideration will be how the terms of the plan are drafted.

Whether an organization is allowed to implement a “use it or lose it” policy for annual paid time off (PTO), under which employees would forfeit unused PTO by the end of each year, depends on the state laws applicable to where the employees work. This can be a difficult question with respect to PTO policies that combine vacation and sick leave, as some states have different rules for each type of leave. In general, it is usually permissible to have a limit on the carryover of unused leave or a cap on maximum leave accrual, but it is important to think through the details and carefully review the laws of all applicable states.

In evaluating whether to provide combined PTO vs. separate vacation and sick leave policies, there is no one answer that applies to all organizations. Both approaches have pros and cons. The choice involves weighing which pros and cons best match your organization’s priorities and capabilities. In general, combined PTO policies are easier to administer, while separate vacation and sick leave policies potentially have lower financial burdens on the organization.