Affects How Hourly Versus Salary Matters Are Addressed
On November 15, 2024, a federal court invalidated the Department of Labor's rule that earlier this year aimed to increase the minimum salary threshold for overtime exemptions under the Fair Standards Labor Act. The court ruled that the DOL overstepped its authority by focusing on salaries instead of job duties to determine overtime eligibility. On November 26, the Department of Labor filed a notice of appeal, announcing its intention to contest the court's decision.
What Did the Rule Propose?
The overturned rule would have:
Increased Minimum Salary: Increased the minimum salary for exempt employees to $43,888 annually in July 2024 and $58,656 in January 2025.
Escalated Salary Thresholds: Automatically updated salary thresholds every three years, starting in 2027.
These changes would have required reclassifying employees earning below the thresholds as non-exempt and paying them overtime for hours worked over 40 per week.
How Does the Court Decision Impact Ministries?
Revert to Previous Threshold: Ministries that raised salaries to meet the DOL’s April 2024 thresholds have the option to return to the prior minimum of $684 per week ($35,568 annually).
No Need for Future Adjustments: Ministries are not required to increase salaries to the proposed January 2025 threshold of $1,128 per week ($58,656 annually).
Continue to Monitor FLSA Changes: The recent federal court ruling that overturned the DOL salary thresholds is currently under appeal, meaning the thresholds could still return in some form. The incoming administration could also have an impact on DOL matters, so be sure to keep an eye on developments affecting how your employees are paid.
NOTE: If you decide to revert to the previous threshold, evaluate how salary adjustments might affect daily operations, employee morale, and job satisfaction.
How Do I Know if an Employee is Subject to the FLSA?
Many employees fall under the FLSA based on their pay structure and job duties. To qualify as an exempt (salaried) worker, employees must meet all three criteria:
Salary Basis: Paid a fixed salary.
Salary Level: Earn at least $684 per week ($35,568 annually).
Duties: Perform executive, administrative, or professional roles.
If these criteria are not met, employees are considered non-exempt (hourly) and must be paid overtime for hours worked over 40 in a workweek. Ministries must also maintain accurate timekeeping for non-exempt employees to ensure compliance.
What About Religious Employees?
The FLSA does not explicitly address clergy, but courts recognize a ministerial exception for roles tied to advancing a ministry’s mission. This typically applies to pastors, ministers, and other religious leaders whose primary function advances the organization’s spiritual function. This exception is applied based on the employee’s job duties, not their titles or ordination status. Each case requires an individual review to determine if an employee qualifies for the exception.
What Should Ministries Do Next?
Review Roles: Ensure employees are properly classified as exempt or non-exempt under current FLSA requirements.
Seek Legal Counsel: Consult a local attorney for advice before making salary or classification changes.
Stay Updated: Continue to monitor for appeals or new regulations.
Posted 12-3-24
The information provided in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.
