Q&A: Understanding Wage and Overtime Laws

Is this church subject to federal minimum wage and overtime compensation laws?

A church employs three ministers and eight nonminister employees. All of the ministers are paid an annual salary. Of the eight nonminister employees, three are in management level positions, and the other five are in secretarial or clerical positions. Is the church subject to federal minimum wage and overtime compensation laws with respect to any of these employees?
The Fair Labor Standards Act (“FLSA”), the federal law that addresses minimum wage and overtime, is one of the most complex employment laws and a thorough review would require an even lengthier response. Religious organizations are not specifically exempted under the FLSA; in fact, many courts have held that this law does apply to employees of religious organizations.
Assuming the FLSA does apply, the question then becomes, which employees might be exempt under the law? In order to be exempt under the FLSA, employees must meet the salary test and the duties test. The salary test requires that a) the employee (part-time or full-time) receives a salary of at least $684 per week ($35,568 per year) and b) the employee’s salary is a predetermined amount that won’t be reduced due to quality or quantity of the employee’s work. The duties test requires that employee’s primary duties fall into one of a few limited categories (executive, administrative or professional). Both tests must be met in order for the employee to be exempt from the FLSA and its minimum wage and overtime requirements.
Let’s start with the three management level employees. In order for the employee to meet the executive exemption, the employee must meet all of the following requirements: a) receive a salary of at least $684 per week ($35,568 per year), b) have the primary duty of management, c) regularly directs the work of two or more full-time (or full-time equivalent) employees, and d) have the authority to make hiring, firing, advancement or other employment decisions. If these management level employees meet the salary test and all of the duties test, then they are likely exempt from the FLSA.
Next, let’s look at the five secretarial and clerical positions. Most likely, these employees will not be exempt from the FLSA, and therefore, must receive minimum wage and overtime in accordance with the law. In addition to meeting the salary requirement, the employees must fall into one of the FLSA exemption categories. While it may be tempting to believe that, due to the value they bring to the organization, the employees fall into the administrative exemption, this is almost never the case with a clerical or secretarial level position. Before classifying a secretarial position as exempt, you should consult a labor law attorney to determine whether this is acceptable.
Finally, let’s consider the three ministerial employees. As long as the minister meets the salary test, ministers will generally fall under the professional exemption. The tricky part comes when a ministerial employee makes less than the $684 per week requirement. Currently, no federal case law exists that definitively addresses this situation. There are, however, a few federal courts and Department of Labor regulations that have concluded the FLSA does not apply to ministers due to the “ministerial exception.”
There are times when an employee can receive a salary and not be exempt from the FLSA, but this does not waive the minimum wage or overtime requirements. Additionally, ministries need to consider state wage and hour laws when deciding how these issues impact their employees. When in doubt about whether an employee can be considered exempt from minimum wage and overtime requirements, it is always safer to assume the employee is not exempt from the law than it is to assume the employee is exempt and discover you were wrong.
To learn more about classifying exempt and non-exempt employees and how the Fair Labor Standards Act applies to churches, purchase the download, “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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