2024 Proposed Salary Threshold for Exempt Employees Announced

On April 23, 2024, the United States Department of Labor (DOL) announced its new standard for determining who qualifies as an exempt employee under the Fair Labor Standards Act. The new rule increased the salary thresholds for overtime pay exemptions under the Fair Labor Standards Act (FLSA).

The new proposed rule raised the minimum salary floor to $55,068 per year ($1,059 per week) for employees classified as exempt effective July 1, 2024.

This means that more employees are eligible for overtime pay. If an employee earns less than $43,888 per year, then in most cases, the employee would need to be classified as non-exempt and would be subject to overtime pay rules. The current salary threshold for exempt employees is $35,568 per year or $684 a week.

Start planning now: Review all ministry employees

The proposed ruling likely affect all businesses and organizations, including ministries. Ministries should:

Review your employee classifications. Ministries governed by the FLSA must classify their employees as non-exempt and exempt. Now’s a good time to ensure all your employees, including clergy, are properly classified.
Review pay for your exempt employees. Know which employees are performing exempt job duties. If you pay the exempt employee less than $43,888 per year, your ministry will need to:
1. Raise the exempt employee’s salary to meet the proposed 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.
Communicate new classification terms to affected employees. Some states require advanced notice of wage changes, so check on your local requirements.

The FLSA and Ministries: Does it apply?

The FLSA covers most ministries, so it is important that your ministry properly classify non-clergy employees as non-exempt or exempt.

Non-exempt employees must be paid minimum wage, and they must be paid overtime if they work more than 40 hours in any 7-day work week.
Exempt employees generally are paid on a salary basis and are not eligible to receive overtime. The courts have held that clergy (those who are ordained or who function in a similar religious capacity) are exempt from federal wage and hour laws. An exempt employee should meet all 3 of the qualifying tests, outlined below.

Some states and communities have even stricter minimum wage and overtime rules. For example, many states have a higher minimum wage than the one required by the federal government, and some require an overtime rate to be paid after the first eight hours of work on any given day. Your state labor office can provide information about these rules.

Qualifying Tests for Exempt Employees

An exempt employee must meet all of following three tests:

Salary basis test—requires that an exempt employee be paid a salary— a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed a salary.
Salary level test—requires that an exempt employee be paid at least the FLSA minimum salary amount. The threshold for exempt employees is $43,888 per year or $844 per week beginning July 1, 2024.
Primary duties test—requires that an exempt employee typically perform executive, administrative, professional, or creative professional job duties. Learn more about exemption categories here. Job duties, not job titles, are the primary factors in passing this test.

Employees who fail to meet all three of these tests generally must be considered non-exempt and paid at least minimum wage and overtime. A non-exempt employee covered by the FLSA must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than one and one-half their regular rate of pay.

Proper Use of the Ministerial Exception

Courts have created a ministerial exception that exempts clergy from federal wage and hour laws. However, this exception only applies to clergy. For non-clergy employees, ministries should follow FLSA rules and classify them as either exempt or non-exempt.

Consult an Expert

Ministry leaders should seek guidance from a locally licensed attorney and CPA when making determinations related to FLSA regulations, including any relevant state-specific mandates.

Related Resources

Updated April 24, 2024

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 encourage you to regularly consult with a local attorney as part of your risk management program.