Fair Labor Standards Act (FLSA)

The federal Fair Labor Standards Act (FLSA) establishes requirements for minimum wage, overtime compensation, recordkeeping, and child labor for employees. Under FLSA, employees are generally classified into two categories: non-exempt and exempt. The FLSA includes specific requirements on who may be considered exempt, how to calculate wages or overtime for non-exempt, and when and how wages may be docked for absences. Special rules apply to both exempt and non-exempt employees.

Non-exempt Employees
A non-exempt employee must be paid for the actual hours worked, and accurate records must be kept to ensure proper compensation. While employers can usually require non-exempt employees to work overtime, the FLSA mandates they be paid overtime at a rate not less than time and a half for any hours worked in excess of 40 in a workweek. A workweek is defined as a fixed and regularly recurring period of 168 hours or seven consecutive 24-hour periods. 

Employers should have policies requiring advanced permission for overtime. Note that even if a non-exempt employee works overtime without permission, they must be paid overtime (although the employee can be disciplined for violating the policy). An employer would be violating the law if they are aware that a non-exempt employee exceeded 40 hours and was not paid overtime. Additionally, it is typically unlawful for private sector employers to provide compensatory time (compensation for overtime hours with time off in lieu of overtime pay) to non-exempt employees, with limited exceptions.

Exempt Employees
To be considered an exempt employee, the law primarily uses a salary threshold test and a duties test. The following types of duties are typically considered exempt from the FLSA requirements: executive, administrative, professional, computer professional, and creative professional.

Exempt employee must be paid on a salary basis (meaning no deductions from weekly pay for quality or quantity of work), and that salary must not be less than $844 per week ($43,888 per year), effective July 1, 2024. A second phase increase to a $58,656 annual salary will be effective on January 1, 2025. If an employee performs exempt job duties but is not paid the minimum salary level, generally, that employee must be considered a non-exempt employee and paid at least minimum wage and overtime.

Exempt employees are compensated based on the type of work they perform rather than the number of hours they work. Christian employers should be mindful of duties mentioned above, such as computer system analysts or teachers.

While most churches are generally not subject to FLSA's wage and hour laws as they do not fall under the definition of enterprises, they may have employees who are individually covered by the FLSA’s wage and hour requirements if they regularly engage in certain activities, such as:

• Ordering teaching materials or other supplies from out-of-state
• Mailing newsletters or other information to people out of state
• Traveling to other states for work purposes
• Maintaining a website from which people from out of state may order items

To learn more about Enterprise and Individual Coverages, check out the U.S. Department of Labor’s #14: Coverage Under the FLSA Fact Sheet.

In contrast, Christian schools are more than likely considered covered enterprises under the FLSA, meaning all staff members will be subject to FLSA's wage and hour requirements unless they are considered exempt (i.e., they meet the salary threshold and duties tests).¹ As briefly mentioned above, it is important to note that teachers may qualify as exempt employees without having to meet a specific salary threshold as long as their primary duty involves teaching and providing instructional activities.²

Classifying preschool employees as teachers may be more difficult because the curriculum standards vary from state to state. Therefore, the curriculum would need to include an elementary-age curriculum, as defined by state law. Therefore, preschool teachers would need to be engaging in elementary-age curriculum, as defined by state law, in order to be considered teachers and qualify for the exemption.

To learn more about Teachers, Daycare Centers, Preschools, and the FLSA, check out the U.S. Department of Labor’s #17S: Educational Establishments and #46: Daycare Centers and Preschools fact sheets.

Other Considerations

In addition to the considerations discussed above for the FLSA, it is important for Christian employers to consider the interplay between state and local laws as it relates to the FLSA, as well as the Ministerial Exception. The complexities of these legal frameworks require careful navigation to ensure compliance and respect for both the letter and spirit of the law. More on all of this below:

State & Local Laws

In the realm of employment law, where federal, state, and local statutes intersect, it is crucial for Christian leaders to proactively seek the counsel of a locally licensed attorney. In California, for instance, the interplay between federal, state, and local regulations is a critical consideration for employers. While most employers in the state are subject to both federal and state minimum wage laws, the state’s provisions often take precedence due to their more protective nature.

Furthermore, local entities, such as cities and counties, possess the authority to enact their own minimum wage rates. This has led to a trend where several cities have adopted ordinances that set a higher minimum wage rate for employees working within their jurisdiction. Christian employers, regardless of where they are located, should always consult with a locally licensed attorney to ensure their ministries’ interests are protected. 

Ministerial Exception

Another classification that isn't specifically straightforward is the "Ministerial Exception." Often, ministers and clergy are categorized under the administrative, executive, and professional exemptions of the FLSA, collectively referred to as white-collar exemptions. However, the interplay between the FLSA and its application and religious employees, particularly employees who aren't Senior or Associate Pastors, can be a complex issue.

Several courts have created a ministerial exception that exempts clergy from employment-related laws, including minimum wage and overtime pay requirements. The exception is intended to apply to pastors, ministers, other ordained employees, or those who function in a similar religious capacity. Courts have used different criteria to evaluate who should be considered a minister for purposes of the exception. In the 2012 U.S. Supreme Court landmark decision, Hosanna-Tabor Evangelical Lutheran Church and School v. EEOC, the Court refrained from providing a specific definition of who should be considered a minister for the purpose of the exception. Instead, the justices outlined three factors that courts should consider:

1. Religious Criteria: Was the religious institution’s decision to hire the individual primarily based on religious criteria?
    
2. Authorization for Ceremonies: Is the individual authorized to perform church ceremonies?
    
3. Engagement in Religious Activities: Does the person engage in ecclesiastical or religious activities and attend to the religious needs of the faithful as part of their job function?³

In applying these criteria, Senior and Associate Pastors within a church, school, camp, etc., would likely fall within the three-factor test. However, custodial staff, secretarial staff, and others whose jobs primarily support ministry work (rather than directly performing ministry tasks) are unlikely to be considered ministers for the exception’s purposes based upon the Hosanna-Tabor case.

In 2020, the U.S. Supreme Court reaffirmed the ministerial exception in the Our Lady of Guadalupe School v. Morrissey-Berru and, some would argue, broadened it to provide more deference to religious employers in deciding whether an employee’s role involves conveying the church’s message and fulfilling its mission, as well as emphasizing the importance of allowing religious organizations to make employment-related decisions in accordance with their sincerely held beliefs.⁴

The Department of Labor (DOL), Wage & Hour Division’s Opinion Letter (FLSA2021-2) serves as a crucial reference in this matter, providing detailed insights into the ministerial exception.⁵ The letter underscores that there isn’t a universal checklist for identifying if an employee qualifies for this exception. Ordination or specific job titles are not prerequisites for an employee to qualify. The determination is made individually, taking into account all relevant circumstances of each employee to assess whether each specific role fulfills the core purpose of the exception. Ultimately, whether an employee is considered a minister hinges on their role and duties in advancing the church's mission and communicating the church's message.

Lastly, it is important to note that DOL Opinion Letters can be utilized as a good faith defense against FLSA violation claims but are not binding interpretations in a court of law. Additionally, interpretations that accompany these opinion letters may change or be rejected with new administrations. A legal opinion from a locally licensed attorney on whether particular employees are exempt from the FLSA is highly encouraged to mitigate potential risks and classification issues.