Failure to pay overtime is one of the leading causes of claims against employers.
It can happen to the most careful of administrators—you miscalculate overtime wages, misclassify an employee, or fail to pay overtime to an employee legally entitled to it. Any one of these can result in serious consequences for a ministry. Failure to pay overtime is one of the leading causes of claims against employers.
Many leaders don't realize that wage and hour laws can apply to churches and religious organizations. To pay employees fairly and avoid being surprised by a lawsuit, it’s important to understand and follow overtime rules.
What Are the Rules?
The Fair Labor Standards Act (FLSA) is a federal law that governs minimum wage and overtime pay. Unless an exemption applies, employers must:
• Pay at least the federal minimum wage.
• Pay overtime after someone works 40 hours in a workweek.
• Pay overtime worth at least 1 ½ times a worker's regular hourly wage.
Many states and communities have even stricter rules.
What are the Penalties?
Employers who violate federal minimum wage and overtime laws are liable for the amount of the unpaid minimum wage or unpaid overtime, plus an equal amount in damages. Employees who win such cases also may collect reasonable attorney fees from your ministry. If a court determines that your ministry “willfully or repeatedly” violated the law, you could be fined up to $1,000 for each violation.1 Employees can collect up to two years’ worth of back wages for unintentional violations and up to three years’ worth for willful ones.2 Willful violations of FLSA regulations may be prosecuted criminally and fined up to $10,000.1
Most wage and hour claims are excluded from insurance coverage, so your ministry could be responsible for paying not only the judgment, but also legal expenses.
Aren’t Religious Organizations Exempt?
Some ministries wrongly assume that they’re exempt from the Fair Labor Standards Act (FLSA), since the law applies to businesses or individuals that “engage in interstate commerce.” Courts interpret the phrase “interstate commerce” very broadly.
If your church or its employees do any of the following activities regularly, you probably engage in interstate commerce:
Order teaching materials or other supplies from out of state.
Mail newsletters or other information to people out of state.
Travel to other states for work purposes.
Maintain a website from which people from out of state may order items.
Even if the FLSA doesn’t apply to your ministry as a whole, the law may apply to individual employees. Nearly all ministries are covered by the FLSA. Consult an attorney before concluding that you’re not.
Do Other Exemptions Apply?
There are a number of exemptions to federal overtime requirements. The most common one applies to teachers, clergy, and others who perform executive, administrative, or professional duties. If the basic requirements are met, your ministry doesn’t need to pay overtime wages to these employees. To learn more, you can download our whitepaper, Changes to Overtime Pay.
What Counts as Work?
Compensable work time is defined as all time employees spend doing job-related activities, whether the work is done on the clock, on the employer’s premises or offsite, or performed outside of normal working hours.3
All hours that you “suffer or permit” an employee to work—even if you don’t request it—count as work time. For a ministry, this may be a bookkeeper who does extra work “voluntarily.” If you know or have a reasonable suspicion that employees are doing the work, you must compensate them. See Distinguishing Between Employees and Volunteers to learn more.
What About Flex Time Within Pay Periods?
While you can’t give employees future “comp time” instead of overtime pay, you can “flex” or adjust schedules within a workweek to prevent employees from incurring overtime. This flexibility can only be used in the current workweek; it doesn’t allow you to average time over multiple weeks.
Example: Your youth leader generally works a regular 40-hour workweek. On a Wednesday, she worked an extra two hours. To avoid exceeding 40 hours and paying overtime, you can require the pastor to work only six hours on Thursday or Friday of that same workweek.
While the government allows some flexibility in a workweek, it doesn’t permit employers to average work time over multiple weeks. A common mistake is to pay an employee straight time if the work hours average 40 hours a week during a multi-week pay period.
Example: The church janitor worked 45 hours in the first week of a pay period and 35 in the second. Although the janitor worked only 80 hours in two weeks, the FLSA requires you to pay the janitor five hours of overtime pay, since he worked more than 40 hours in the first week.
How Can We Avoid Mistakes?
The biggest mistake your ministry can make is assuming that you don’t have to comply with wage laws. Even if one or two of your employees may be exempt from the FLSA, it’s best to assume that most people fall under its jurisdiction. Other ways to safeguard your ministry include becoming well-versed in federal wage and hour rules, monitoring the hours your employees work, and keeping detailed pay records.
You also need to be aware of minimum wage laws and overtime rules in your state, since these can be stricter than federal rules. Your state labor office can provide this information.
Here’s where to find more information about overtime and minimum wage rules: