Calculating Overtime

Incorrectly paying employees can leave churches exposed to lawsuits.

You’ve noticed that Brenda, your church secretary, often arrives early and works late. When you ask Brenda how many hours she’s putting in, she admits working more than 40 hours a week. Brenda says she views her job as a ministry, so she doesn’t mind volunteering some of her time.

You think Brenda is a terrific employee, but you can’t afford to pay her overtime. What should you do?

Here are your options. You could:

  1. Say “Great! Keep up the good work!”
  2. Award Brenda some unpaid time off in the future she can use to make up for the extra hours she has worked.
  3. Pay Brenda overtime, despite her protests.
  4. Reduce the number of overtime hours you allow Brenda to work.
  5. Give Brenda a raise and promote her to office manager, a salaried position with essentially the same responsibilities.
  6. If you chose either c or d, you have a good working knowledge of overtime rules. Federal labor law requires you to pay time and a half to all employees who work more than 40 hours in one week, with limited exceptions. State laws can be stricter.
  7. Under federal law, unpaid time off (comp time) isn’t an option for non-government workers. Overtime must be paid in cash. Nor is claiming that hourly workers are salaried professionals to whom overtime rules don’t apply. The only way to limit how much overtime you pay Brenda is by reducing the number of hours you permit her to work. Ignoring the situation could cost up to three years’ worth of back pay—or worse—if a court finds that you violated state or federal wage laws.
  8. What Should We Do?
  9. As a Christian employer, you want to pay your employees fairly. As a small, non-profit organization, you may struggle to contain costs and track everyone’s hours. Failure to pay overtime is one of the leading causes of claims against employers. To avoid being blindsided by a lawsuit, it’s important to comply with applicable overtime rules and avoid common mistakes ministries make.
  10. What Are the Rules?
  11. The federal Fair Labor Standards Act (FLSA) governs minimum wage and overtime pay. Unless an exemption applies, employers must pay workers covered by the FLSA at least the federal minimum wage, plus one and one-half times their regular pay rate for all hours worked over 40 in a workweek. The federal minimum wage is $7.25 an hour. The employer and employee cannot agree to waive overtime payment that is due under the act.
  12. What are the Penalties?
  13. Employers who violate federal minimum wage and overtime laws—knowingly or not—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 you “willfully” violated the law, you could be fined up to $11,000 for each violation. Employees can collect up to two years’ worth of back wages for unintentional violations and up to three years’ worth for willful ones. 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.
  14. Aren’t Religious Organizations Exempt?
  15. Some ministries wrongly assume that they’re exempt from the Fair Labor Standards Act, since the law applies only 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, you probably engage in “interstate commerce.”
  16. Order teaching materials or other supplies from out of state.
  17. Mail newsletters or other information to people out of state
  18. Travel to other states for work purposes.
  19. Maintain a Web site from which people from out of state may order items.
  20. Nearly all ministries are covered by the FLSA. Consult an attorney before concluding that you’re not.
  21. Do Other Exemptions Apply?
  22. 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. Find the requirements in the accompanying article: “Are Your Employees Exempt?”
  23. What Counts as “Work?”
  24. All time employees spend doing job-related activities potentially counts as work time, whether the work is done “on the clock” or not. This includes work done from home, work performed outside of normal working hours, and work done “voluntarily.”
  25. All hours that you “suffer or permit” an employee to work—even if you don’t request it—counts as work time. If you know or have a reasonable suspicion that employees are doing the work, you must compensate them.
  26. The premise is this: You can’t accept the benefits of work without paying employees for those benefits. Simply telling employees they’re not supposed to work more than 40 hours in a week isn’t good enough. You must make every effort to enforce the rule.
  27. What About Flex Time?
  28. While you can’t give employees future “comp time” instead of overtime pay, you can adjust schedules within a workweek to prevent employees from incurring overtime. For example, if your youth minister works 10 hours on Wednesday, you can send him home two hours early on Thursday or Friday, so his work doesn’t exceed 40 hours.
  29. This flexibility doesn’t allow you to average time over multiple weeks. A common mistake is to pay an employee at his regular rate if he averages 40 hours a week during a pay period. Let’s say that someone works 45 hours in the first week of a pay period and 35 in the second.
  30. Although the employee worked only 80 hours in two weeks, the FLSA requires you to pay that employee one and a half times his regular pay for five hours, since the employee worked more than 40 hours in the first week.
  31. How Can We Avoid Mistakes?
  32. The biggest mistake you 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. This means you need to learn about federal wage and hour rules, monitor the hours your employees work, and keep detailed pay records. You also need to be aware of any 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. You can find contact information for your state office on the U.S. Wage and Hour Division’s website. Your telephone directory should also contain a listing.
  33. Making sure your employment practices comply with overtime rules not only helps you to pay fair and reduce the probability of lawsuits, but it also may improve employee morale.
  34. Kathleen Turpin is the vice president of human resources at Brotherhood Mutual Insurance Company. This article is excerpted from the downloadable resource Understanding Wage and Hour Laws.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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