New Overtime Rules on Horizon

Previous proposal would have increased number of ministry employees eligible for overtime pay. 

 

Some ministries were caught up in a whirlwind of activity after the federal government proposed rule changes in 2016. New minimum salary levels would have made millions more employees eligible for overtime pay, including ministry workers. 

The rules were suspended—and then ultimately struck down—by a federal judge before they took effect. But change is on the horizon. The U.S. Department of Labor  intends to propose revised rules in October 2018. 

What You Need to Know

It’s important to understand how the Fair Labor Standards Act (FLSA) applies to ministries, so you can prepare for the next round of changes. 

Employers generally know that employees who are exempt from FLSA rules don’t earn overtime pay. But the rules are more complicated than that, and ministry employers must consider some issues unique to them. 

Here are answers to some common questions about how the federal overtime rules affect ministry employees.

Does the FLSA Apply to Ministries?

Yes, most ministries are covered by the FLSA, and it is important that your ministry properly classifies employees as non-exempt or exempt. The “enterprise” test and the “individual employee” test are used to determine whether employers are subject to the FLSA. Most ministries are covered by the FLSA under one test or the other. 

Read more about these two tests:

Who’s an Exempt Employee?

Ministries governed by the FLSA must classify their employees as either non-exempt or exempt. Non-exempt employees must be paid minimum wage, and they also must be paid overtime if they work more than 40 hours in a week. Some states, such as California, also require overtime pay for time worked over eight hours in one day. 
By contrast, exempt employees generally are paid on a salary basis and are not eligible to receive overtime. Clergy (those who are ordained or who function in a similar religious capacity) have been held by courts to be exempt from federal wage and hour laws. 

Qualifying Tests

An exempt employee must meet the following three tests:

  • Salary basis test: This test requires that an exempt employee be paid a salary, and it limits the types of deductions that can be made to the employee’s salary.
  • Salary level test: This test requires that an exempt employee be paid at least the FLSA minimum salary amount. This amount is currently $23,660 a year ($455 a week). 
  • Primary duties test: This test requires that an exempt employee typically perform executive, administrative, professional, or creative professional job duties. It’s important to note that a job title, such as “office manager” is not a determining factor. The employee’s job duties must pass the primary duties test.

 

Exempt vs. Non-Exempt … Salary vs. Hourly

An employee can meet the primary duties test but not pass the salary basis test, or pass the salary basis test but not satisfy the primary job duties test. Employees that fail to meet all three of these tests generally must be considered non-exempt and must be paid at least minimum wage and overtime. While employers can pay a non-exempt employee a salary without violating the FLSA, this often results in a misunderstanding.

Paying a non-exempt employee a salary does not eliminate the need to pay overtime or minimum wage. You may find it helpful to read this article, Can a Part-Time Employee be Paid a Salary? on MinistryWorks.com. 

What if We Don’t Pay Enough?

If you currently have an employee performing exempt job duties, and the employee is being paid a salary of less than $23,660 per year, your business or ministry needs to do one of two things:

1. Raise the employee’s salary to meet the current minimum salary level, or

2. Reclassify the employee as non-exempt. This will subject the employee’s pay to minimum hourly wage requirements and overtime.

What about the Ministerial Exception?

Courts have created a ministerial exception that exempts clergy from federal wage and hour laws. It does not appear as though an increase to the minimum salary level would affect the ministerial exception. The ministerial exception is intended to apply only to pastors, ministers, or other employees who are ordained or who function in a similar religious capacity. For non-clergy employees, ministries should follow FLSA rules and classify them as either exempt or non-exempt.

Consult an Expert

Ministry leaders are strongly encouraged to consult a locally licensed attorney to confirm which ministry employees may qualify for the ministerial exception, and any other exemptions from overtime requirements. An attorney who’s familiar with employment law and with your ministry organization will be able to ensure that you are complying with all applicable federal and state employment laws, as well as help you protect your ministry’s interests.