Have you heard that overtime regulations changed this year? In May, the Department of Labor finalized new federal regulations that go into effect on December 1, 2016, expanding overtime protection for millions of workers in the United States. Many pastors, church administrators, and personnel committee members have since asked about how these new regulations may impact church budgets. Below is a quick summary of the changes to the federal regulations and the potential implications for church employees. Ultimately, pastors and lay leaders should consult an attorney if they have questions about how specific employees may be affected.
Fair Labor Standards Act (FLSA)
The Fair Labor Standards Act of 1938 (FLSA) provides a minimum level of protection for much of the American workforce, including setting an hourly minimum wage, a forty-hour workweek, and overtime pay requirements. Unless exempt, FLSA-covered employees are entitled to at least minimum wage plus overtime at the rate of time and one-half for any hours worked over 40 in one week. FLSA sets a salary threshold below which overtime is automatic for covered employees. On December 1, this threshold increases from an annual salary of $23,660 to $47,476. These new regulations also include a formula which will likely adjust the salary threshold every three years going forward. Churches and other nonprofits are not categorically exempt from FLSA.
[N.B. Some states and cities have enacted their own minimum wage and overtime protections. The controlling law is whichever one provides better protection for the employee. For a listing of state minimum wage and overtime laws, click here.
FLSA and ministers
The Department of Labor does not consider ministers working in churches or religiously-affiliated institutions to be employees within FLSA protections. There is, however, no bright-line rule for who is and is not a minister. Courts have traditionally looked at the totality of the circumstances, including title, job description, religious-based duties, ordination, or leadership role in corporate worship to determine if someone was a minister (therefore not covered by most employment protections) or not a minister (and potentially covered by most employment protections). Since courts examine the totality of the circumstances, churches cannot circumvent FLSA by placing “minister” or “pastor” in all job titles and sprinkling religious terms throughout job descriptions. If challenged in court, such a church would likely lose if the employee did not actually perform ministerial duties within the life of the church.
FLSA and non-ministerial church employees
Many church employees are not ministers and could be covered by FLSA in one of two ways: enterprise coverage or individual coverage. If a church is engaged in a business such as operating a school, day care center, bookstore, or café, it may meet the enterprise test. If a church meets the enterprise test, all of its non-ministerial employees would be covered by FLSA. Individual coverage applies to any employee who regularly engages in interstate commerce, which is broadly defined to include activities such as interstate communication by phone, mail, or e-mail and ordering or receiving goods from an out-of-state supplier. See DOL guidance.
If the FLSA applies to a non-ministerial employee, the employee will be entitled to overtime unless she falls within one of the exemptions. To be exempt, the employee must pass both the salary threshold and a white-collar duties test. The salary threshold on December 1, 2016, will be $47,476 per year. Three of the most common duties tests are for bona fide executive, administrative, or professional employees. The Society for Human Resource Management has created a useful form to help employers evaluate whether an employee meets a duties test for 6 different white-collar classifications. If a non-ministerial employee earns more than $47,476 per year and meets one of these 6 duties tests, then she is not entitled to overtime under FLSA.
Before December 1, churches should take advantage of this opportunity to evaluate their employees’ status under FLSA. Some questions to start this process include:
• Who is a minister? Who is a non-ministerial employee?
• Is the church going to allow overtime?
• Does FLSA cover the non-ministerial employee(s)?
• Does the covered employee work more than 40 hours in a workweek? How often? How much? (If this happens consistently, the church should also consider whether it needs to rearrange job responsibilities or hire a new employee to share the workload.)
• Does the covered employee make less than $47,476 per year?
• Does the covered employee meet one of the duties tests?
• If so, is it better to pay the occasional overtime or to raise the annual salary to $47,476?
Church employees serve the church family in many small and large ways. Meeting our legal obligations to them is one way the church honors their service.
**Since writing my article, two lawsuits were filed to block the implementation of these regulations. A lawsuit filed by 21 states successfully obtained an emergency nationwide injunction on November 22, 2016, thus preventing the new regulations from taking effect on December 1.
The U.S. Department of Labor is continuing its efforts to implement the new overtime regulations by appealing the judge’s injunction. Although they requested an expedited appeal schedule, it is unlikely that the case will be resolved prior to President-elect Donald Trump’s inauguration on January 20, 2017. If the appeal is not concluded by then, a Trump administration could choose to continue the appeal or to withdraw it. If the Trump administration withdraws the appeal, the injunction remains intact and the federal overtime regulations unchanged.
Many churches reviewed their employee job descriptions, pay rates, and workloads in anticipation of the new regulations. If your church did not, consider doing so in preparation for the next budget cycle. Even though these specific regulations may never be implemented, it remains a good stewardship practice for all churches to periodically review employee job descriptions, pay rates, and workloads.