Valued workers: They could prove costly under federal law. (Labor Law).

That secretary who happily types away through her lunch hour between quick bites of a sandwich or the clerk who volunteers every weekend to take work home may seem like every employer's dream, but they also may be breaking the law.

Nonprofit organizations too often mistakenly think employment laws don't apply to them. Those that ignore the laws, whether willfully or out of ignorance, risk fines, lawsuits and possible litigation. Besides the financial cost, the public relations damage can be devastating to a nonprofit.

The Fair Labor Standards Act (FLSA) has been on the books for more than 60 years, but remains a constant source of confusion for employers and employees. "Too many nonprofits think the Fair Labor Standards Act doesn't apply to them because they're not-for-profit," said Leo Griffin, director of finance for the Sisters of the Holy Names of Jesus and Mary in Spokane, Wash. "But the law applies to any organization engaged in commerce. And if you use a telephone, a fax machine or the U.S. mail, you're engaged in commerce."

Griffin is a CPA who teaches at the School of Business at Gonzaga University and conducts a seminar on the FSLA for nonprofits. He said many nonprofits unwittingly run into trouble with the FLSA because their staffs are small and they often don't have a human resource person properly trained in employment law.

But, ignorance is no excuse and a very poor defense when an organization violates the FLSA. It is the employer's responsibility to understand the FLSA, to comply with the law and to show proof of compliance, said Nora Kelly, a Denver attorney who specializes in employment law.

"This is probably one of our most employee-friendly laws," Kelly said. "It's been on the books since 1938, and a lot of employers have tried a lot of things to get around it. The government is pretty good at recognizing violations and ploys to circumvent the law."

The FLSA covers four basic areas: minimum wage requirements, overtime pay, restrictions on employment of children, and recordkeeping. The law has been amended several times since 1938, but many experts say it hasn't kept up with today's work environment. A law that at first glance seems straight forward is actually fraught with gray areas.

The number one place employers run into trouble with the FLSA is by misclassifying employees, resulting in nonpayment of overtime. Employees classified non-exempt are generally paid by the hour and must be paid one and one-half times their regular rate for any time they work over 40 hours in a single work week. Exempt employees are paid a salary and are not paid overtime.

However, simply paying an employee a salary rather than hourly wage doesn't make them exempt. Exempt employees also must spend a majority (typically 80 percent) of their time performing either executive, administrative, or professional duties. Duties that fail into these categories generally require a high degree of independent judgment, authority over an organization's policies and its employees, and may require specialized education or degrees.

"One trick employers will have is to call a job administrative when it really isn't," Kelly said. "Or, they'll make a job title sound professional when it really isn't under the law. They may call a position accounting, which is exempt, when it really is bookkeeping (which does not fall into the exempt category). But the courts look at the actual tasks performed, not titles."

Nonprofits run into problems because they often have a lot of non-traditional jobs that don't fit into typical job classifications, said Jean Robinson, former general counsel of Goodwill Industries International, who now practices employment and labor law in Lorton, Va.

"Problems often occur with the lower-level programmatic management jobs," Robinson said. "It's a management title, but the person may end up doing a lot of non-exempt duties, like secretarial or clerical duties, which are non-exempt. They may do enough non-exempt duties to tip the scale. The smaller the organization, the more common the offense."

Robinson emphasized that it's an employee's duties, not the title, that determines exempt/non-exempt status. If your chief financial officer spends a larger part of the day typing, filing or doing basic bookkeeping, the person may not qualify as exempt and may be owed overtime payment.

Since exempt employees are paid a salary independent of the hours they work or performance, they can't be docked for partial days off or required to keep a record of their hours unless required for another legitimate reason such as compliance with a government contract or grant. Even an exempt employee who voluntarily uses a half-day of vacation to take care of personal business may get an employer in trouble.

Employers who misclassify employees can end up having to pay those workers for unpaid overtime and damages, and may be fined. If the organization doesn't have accurate records, the courts will likely rely on the employee's memory to determine the overtime worked.

Employees can not voluntarily relinquish their rights under the ELSA. Donna Wilson, general counsel for Goodwill Industries International, in Bethesda, Md., said employees at nonprofits sometimes ask to be classified as exempt because they perceive that salaried employees have more status over hourly employees. Other employees ask to be put on salary as a way to save the organization money. Robinson warns nonprofits to beware of this good Samaritan employee.

"Because nonprofits are mission-oriented, they tend to have mission-oriented employees," Robinson said. "These employees may waive their rights, forgo overtime payment or voluntarily work off the clock. Supervisors may be used to people volunteeing so they let them. That mindset can get you in trouble."

Another area nonprofits run into trouble is properly compensating employees who attend training or out-of-town conferences. The rule of thumb is that if the training or trip is required, it falls under the FLSA. This may mean paying an hourly employee overtime for time spent traveling.

Compensatory (comp) time is one of the most misunderstood aspects of the ELSA. Non-exempt employees can only be offered time off in lieu of payment for overtime if the time off is used within the same work week and not banked or accrued.

It's not enough to comply with the FLSA. Employers must prove they comply. The EISA requires employers to keep records of employee hours for three years.

Griffin said he's heard of a minor who cut his finger while working for a nonprofit organization. The minor filed a claim. The Department of Labor (DOL) investigated because the employee was a minor. (FLSA also covers child-labor laws.) The organization had complied with all child-labor laws, but the employee had not properly clocked in so the organization could not prove compliance. The organization ended up being fined for failure to keep adequate records.

Any organization has about a 0.5 percent chance of being randomly audited by the Department of Labor DOL, Griffin said. However, an audit is practically a sure thing after an employee files a complaint.

Pete Lewis is a reporter for the Denver News Bureau.

RELATED ARTICLE: A Checklist For Labor Law Compliance

Very few nonprofits knowingly violate the Fair Labor Standards Act (FLSA), experts said. Most violations are the result of ignorance or misunderstanding. But it's the employer's responsibility to know and comply with all employment and labor laws.

Make at least one staff person responsible for learning about the FLSA. You may want to send staff to a seminar or workshop on employment law. The U.S. Department of Labor provides a lot of useful information on its Web site www.dol.gov.The Society of Human Resource Management in Alexandria, Va., is another valuable resource. Some situations may warrant hiring an outside consultant.

Here are some key steps to maintaining compliance:

* Review the classification of your employees. This may include breaking down employees' specific duties. If an exempt employee spends more than 20 percent of the time performing non-exempt duties that employee may be misclassified.

* Review your personal policies. Non-exempt employees can not be docked for partial days off, nor can they use vacation, personal or sick days to offset brief absences during the work day. The FLSA does not require that employees have meal periods or breaks. However, if you don't pay employees for breaks they must be relieved of all duties.

* Review your record keeping policy. FLSA requires that you keep accurate payroll records for three years. Are employees: starting Work before they punch in, working after they've signed out, taking work home, working during lunch or volunteering to work for free or without being compensated for overtime?

* Review your overtime policy Commissions, bonuses, profit-sharing, shift differentials, on-call pay and weekend premiums can factor into an employee's overtime pay rate.

* Review your compensatory timeoff policy. Exempt employees should not receive comp time since they are not eligible for overtime pay. Non-exempt employees can only receive comp time off in lieu of overtime pay if it is used within the same work-week.

* Take a close look at any independent contractors. The FLSA is very clear about the conditions a worker must meet to be considered an independent contractor.

* Identify any minors and make sure you're complying with child labor laws. The FLSA is very specific about the types of duties that a minor can perform, and when, where and how many hours they can work.

* Review your policy for volunteers. You should have a written volunteer policy and agreement. In most cases, volunteers can not perform duties if they are replacing an employee who is normally paid to perform those same duties.

* Review your travel time policy Non-exempt employees usually must be compensated for work-related travel time.

* Train all your staff about the laws and make sure you front-line management is empowered to enforce compliance.

* Designate someone to monitor compliance.

* Make periodic audits and issue regular reminders.

* Welcome employee complaints.

* If you are audited by the Department of Labor: Be cooperative; provide the auditors with every thing they ask for, but do not provide anything that they don't ask for; provide the auditors with space to work in your conference room; do not let the auditors into your payroll or human resources office where files are kept; inform your attorney, but don't get your attorney involved unless you're charged with a violation.