Pastor, Church & Law

§ 8.08.08

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Individual Coverage of Church Employees

• A church has annual revenue of $300,000 and employs four persons (a pastor, a youth pastor, a church secretary, and a custodian). It engages in no "businesses" that compete with for profit companies, and does not operate a preschool or school. The church secretary asks the pastor if she is entitled to overtime pay for hours that she occasionally works in excess of 40 per week. The secretary is not entitled to the overtime provisions of the Fair Labor Standards Act on the basis of enterprise coverage for two reasons. First, the church is not engaged in commerce or in the production of goods for commerce; and second, the church does not have business income of $500,000 or more.
• Same facts as the previous case study except that the secretary purchases office supplies from a local office supply store two or three times each year. Do these purchases satisfy the individual coverage provisions of the Act, entitling the secretary to overtime pay for hours worked in excess of 40 each week? Probably not. The Department of Labor's Opinion Letter dated November 4, 1984, states that church employees are individually covered under FLSA, even if their employing church is not an "enterprise," if they "regularly and recurrently use the telephone, telegraph, or the mails for interstate communication or receive, prepare, or send written material across state lines." However, individual coverage will not be asserted "for office and clerical employees of a church who only occasionally or sporadically devote negligible amounts of time to writing interstate letters or otherwise handle interstate mail or make bookkeeping entries related to interstate transactions."
• Same facts as case study 1, except that the secretary purchased office supplies once or twice each year over the Internet from the same out-of-state office supply store. These purchases were always less than $100 per order. Do these purchases satisfy the individual coverage provisions of the FLSA, entitling the secretary to overtime pay for hours worked in excess of 40 each week? Probably not. See the analysis in case study 2.
• Same facts as case study 1, except that for the past 3 years the church secretary has purchased office supplies about 10 times each year over the Internet from various out-of-state office supply stores. These purchases included computers, computer software, office equipment, and office supplies, and averaged $4,000 per year. Do these purchases satisfy the individual coverage provisions of the FLSA, entitling the secretary to overtime pay for hours worked in excess of 40 each week? Probably. The court in the Boekemeier case (summarized in Section 8-08.3) concluded that a church employee satisfied the individual coverage provision and was entitled to overtime pay since he made "recurrent and frequent purchases" of goods from five out-of-state vendors, amounting to between 14 and 30 purchases over a five year period (between three and six such purchases each year), for such items as custodial supplies and "important items to the church" such as a computer, electronic equipment, and a refrigerator. The secretary in this example made ten purchases from various out-of-state vendors each year, not only for office supplies but also for "important items to the church" such as computers and computer software.
• Same facts as case study 4, except that the church secretary makes all of these purchases from an office supply store a mile from the church (in the same state). Do these purchases satisfy the individual coverage provisions of the FLSA, entitling the secretary to overtime pay for hours worked in excess of 40 each week? No, they do not. In order for the secretary to qualify for individual coverage under the Act, she must be "engaged in commerce" or "engaged in the production of goods for commerce." The word "commerce" is defined by the FLSA as "trade, commerce, transportation, transmission, or communication among the several states or between any state and any place outside thereof." In other words, the "commerce" must be either interstate or foreign. Exclusively local commercial transactions, such as the secretary's purchases of office supplies from a local office supply store, do not meet this definition.
• Same facts as case study 4, except that the office supply store is ten miles away in another state. The analysis would be the same as in case study 4.
• Same facts as case study 1, except that the church secretary purchases Sunday school literature from an out-of-state publisher twice each year. Each shipment costs an average of $5,000. Do these purchases satisfy the individual coverage provisions of the FLSA, entitling the secretary to overtime pay for hours worked in excess of 40 each week? Probably. The court in the Boekemeier case (summarized in Section 8-08.3) noted that "sporadic and occasional shipments of insubstantial amounts of goods" are not enough to invoke the overtime pay and minimum wage provisions of the Act. While the purchases of Sunday school literature were certainly "occasional," these purchases did not consist of "insubstantial amounts of goods." Literature for the church's education program would be substantial both in terms of amount of goods purchased from the out-of-state vendor and the importance of those goods to the church.
• Same facts as case study 1, except that the secretary places or receives between 5 and 10 long distance calls each month involving persons in other states. Do these calls satisfy the individual coverage provisions of the FLSA, entitling the secretary to overtime pay for hours worked in excess of 40 each week? Probably so, according to the wording of the Fair Labor Standards Act and a Department of Labor publication. The Act defines "commerce" to include "transmission or communication among the several states or between any state and any place outside thereof." Further, a Department of Labor publication states that interstate commerce means "any work involving or related to the movement of persons or things (including intangibles, such as information) across state lines or from foreign countries." This publication gives the following example of an employee who is engaged in interstate commerce: "An employee such as an office or clerical worker who uses a telephone, facsimile machine, the U.S. mail, or a computer e-mail system to communicate with persons in another state." As a result, it is virtually certain that the Department of Labor would consider the secretary to be engaged in commerce, and therefore subject to the overtime pay and minimum wage provisions of the Act.
• Same facts as case study 1, except that the secretary sends and receives several e-mail messages each week from a computer in her church office. Many of these e-mails are sent to, and received from, persons in other states. The analysis in case study 8 would apply to this case study.
• Same facts as case study 1, except that the secretary occasionally travels to another state while performing her job. Do these trips satisfy the individual coverage provisions of the Act, entitling the secretary to overtime pay for hours worked in excess of 40 each week? Probably so, according to the wording of the Fair Labor Standards Act and publications issued by the United States Department of Labor. The word "commerce" is defined by the Act to include "transportation among the several states or between any state and any place outside thereof." A Department of Labor publication states that interstate commerce means "any work involving or related to the movement of persons or things (including intangibles, such as information) across state lines or from foreign countries." This publication gives the following example of an employee who is engaged in interstate commerce: "An employee who drives or flies to another state while performing his or her job duties." As a result, it is virtually certain that the Department of Labor would consider the secretary to be engaged in commerce, and therefore subject to the overtime pay and minimum wage provisions of the Act.
• Same facts as case study 10. What, if any, effect does the secretary's involvement in interstate commerce have upon the church custodian's entitlement to overtime pay and the minimum wage? The church does not meet the enterprise test since it is not engaged in commerce or in the production of goods for commerce, and does not have business income of $500,000 or more. Therefore, the only way for church employees to be covered by the Act's overtime pay and minimum wage provisions is by meeting the individual coverage requirements. Since individual coverage is on an individual basis, the fact that the secretary meets the individual coverage test has no effect on the church custodian. She will be entitled to overtime pay and the minimum wage only if she independently meets the individual coverage requirements summarized in this chapter.

Enterprise Coverage

• A church receives rental income of $550,000 each year from the rental of its facilities and several homes that it owns. In addition, it has at least two employees who are engaged in interstate commerce because of their frequent interstate purchases, telephone calls, and e-mail messages. The church meets the enterprise test since it "has employees engaged in commerce or in the production of goods for commerce" and has annual business income of at least $500,000. As a result, all of the church's non exempt employees are covered by the Act's overtime pay and minimum wage provisions.
• A church does not operate any businesses, and has annual revenue of $300,000. It also operates a preschool that generates an additional $20,000 of income. Are employees of the preschool and church covered by the Act's overtime pay and minimum wage requirements? The Act defines an enterprise to include any organization that "is engaged in the operation of a … preschool, elementary or secondary school, or an institution of higher education (regardless of whether or not such … institution or school is public or private or operated for profit or not for profit)." Does this mean that both preschool and church employees are covered by the Act's protections? Probably. Note that the Act's definition of an enterprise includes an organization that "is engaged in the operation of" a school or preschool. This language would include a church that operates a school or preschool, and so it should be assumed that all of the nonexempt employees of a church that operates a school or preschool are covered by the Act's overtime pay and minimum wage requirements.

Occasional workers (including nursery attendants)

• Lisa works for two hours on one Sunday each month in her church's nursery. She works as a volunteer, and receives no compensation. The FLSA has no application to her. The Department of Labor Opinion Letter of November 4, 1983 (summarized in Section 8-08.4) states: "Individuals who volunteer their services, usually on a part time basis, to a church or synagogue not as employees or in contemplation of pay are not considered to be employees within the meaning of FLSA. For example, persons who volunteer their services as lectors, cantors, ushers or choir members would not be considered employees. Like wise, persons who volunteer to answer telephones, serve as doorkeepers, or perform general clerical or administrative functions would not be employees."
• Same facts as the previous case study, except that the church pays Lisa $3 per hour for her services. Should the church pay Lisa the federal minimum wage? Assume that the state minimum wage is less than the federal minimum wage. Note the following factors that are relevant in answering this question. (1) The FLSA defines the term employee as "any individual employed by an employer," and adds that an employee includes a person who is "suffered or permitted" to work. This is a very broad definition, and is much broader than the definition used by the IRS for tax purposes. (2) The Department of Labor Opinion Letter of November 4, 1983 (quoted above) states: "In situations where the understanding is that the person will work for wages there will be an employment relationship." (3) If a church meets the definition of an enterprise, then compensated nursery workers (as well as other compensated staff positions) would be regarded by the Department of Labor as employees covered by the FLSA's protections. Note that the FLSA defines an enterprise to include any organization that is engaged "in the operation of a … preschool, elementary or secondary school, or an institution of higher education." So, churches that operate any of these entities will be regarded as enterprises by the Department of Labor. (4) If the church is not an enterprise, then nursery workers and other compensated workers will be covered by the FLSA's minimum wage and overtime pay provisions only if they meet the "individual coverage" requirement. In this regard, note that the Department of Labor Opinion Letter of November 4, 1983 (summarized in Section 8-08.4) states: "Individual coverage will not be asserted, however, for office and clerical employees of a church or synagogue who only occasionally or sporadically devote negligible amounts of time to writing interstate letters or otherwise handle interstate mail or make bookkeeping entries related to interstate transactions." If there is any doubt concerning a compensated worker's entitlement to the minimum wage and overtime pay, church leaders should seek legal advice.

Actual Time Worked in Commerce

• A church has annual revenue of $300,000, and employs four persons (a pastor, a youth pastor, a church secretary, and a custodian). It engages in no "businesses" that compete with for profit companies. The church secretary asks the pastor if she is entitled to overtime pay for hours that she occasionally works in excess of 40 per week. The secretary's "interstate" activities during year 2000 include (1) 7 purchases of church supplies over the Internet (each purchase was in a different week), and (2) 10 out-of-state telephone calls (each call was made during a different week, and no call was made during the same week as an Internet purchase). These purchases and telephone calls probably are enough to satisfy the individual coverage provisions of the Act, entitling the secretary to overtime pay for hours worked in excess of 40 each week. However, the church's records demonstrate that the secretary was engaged in interstate commerce only during 17 weeks of the year (the weeks in which Internet purchases and out-of-state telephone calls were made). Note that an employer's obligation to pay minimum wage or overtime compensation is determined on a weekly basis. As a result, the church could argue that the secretary was engaged in commerce only during these 17 weeks and was entitled to overtime pay only during these weeks and not for hours worked in excess of 40 during the remaining 35 weeks of the year when she was not engaged in commerce.
• Same facts as case study 16. The church keeps no records "clearly showing" the duties the secretary performed in interstate commerce and the wages she was paid during those weeks. The secretary is entitled to overtime pay for the entire year.
• A church operates a preschool five days each week. Can the church avoid the application of the Fair Labor Standards Act's overtime pay and minimum wage provisions by keeping records showing that its preschool employees are rarely if ever engaged in interstate commerce? Probably not. As noted above, the Act defines the term enterprise engaged in commerce or in the production of goods for commerce to include an enterprise that (1) "has employees engaged in commerce or in the production of goods for commerce" with annual business income of $500,000 or more, or (2) is engaged in the operation of a school. There is no requirement that preschool employees actually be engaged in commerce. They are covered by the Act because of the "enterprise" status of their employer.

Church Board Minutes

• A church custodian frequently works more than 40 hours per week, and is paid overtime compensation. The church board decides to place the custodian on a salary basis of $36,000 in order to avoid having to pay him overtime compensation. The board minutes state: "Custodian placed on salary of $36,000, to avoid overtime obligations." Church board members can be personally liable for violating the FLSA. This liability may be either criminal (in the case of willful violations) or civil. The Act specifies that "any person" who willfully violates the overtime pay or minimum wage provisions is subject to criminal prosecution. In addition, the Act specifies that any employer that violates the minimum wage or overtime pay provisions of the Act "shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages." In a recent federal court case, a church employee asserted that the church's board members were personally liable for their failure to pay him overtime compensation. He pointed to an excerpt in the minutes of the church board entitled "Concerns of the Board" which expressed concern over "overtime and compensatory time as it applies to hourly staff and to management." The court relied in part on this excerpt in concluding that the church and board may have "willfully" violated the overtime pay protections of the FLSA.[57] Boekemeier v. Fourth Universalist Society, 86 F.Supp.2d 280 (S.D.N.Y. 2000).

Employment Discrimination

Overview

Congress has enacted a variety of employment and civil rights laws, including:

• Title VII of the Civil Rights Act of 1964
• Americans with Disabilities Act
• Age Discrimination in Employment Act
• Family and Medical Leave Act
• Fair Labor Standards Act
• National Labor Relations Act
• Employee Polygraph Protection Act
• Occupational Safety and Health Act

Congress enacted all of these laws under its constitutional authority to regulate interstate commerce. Is a church engaged in a business, industry, or activity affecting commerce? Maybe yes, maybe no. Churches can be exposed to substantial liability if they mistakenly assume that they are not subject to federal employment laws because they do not meet the commerce requirement.

Some federal civil rights and employment laws apply only to employers having a minimum number of employees. You'll want to be sure you understand the determining factors in whether or not your church is held to the federal requirements for these civil rights laws.

And don't be lulled into thinking the First Amendment guaranty of religious freedom means these civil rights laws don't apply to you and your church. Although the courts have applied a socalled ministerial exception in many cases, there have been several instances where the ministerial exception did not hold up in court. Here's a quick snapshot of how the civil rights laws may affect your church and ministers. If you have the required minimum number of employees.

Title VII & the Church

This law prevents against discrimination in hiring on the basis of race, color, national origin, gender, or religion. Religious organizations are exempt from the ban on religious discrimination, but not from the other prohibited forms of discrimination.

The Church & Sexual Harassment

Sexual harassment addresses unwelcome sexual contact, whether or not that contact is voluntary. Churches are held to the same standards of conduct regarding sexual harassment among employees.

The Age Discrimination in Employment Act

Churches can't discriminate in hiring on the basis of age.

The Americans with Disabilities Act

Religious organizations are not required to comply with the ADA requirements to hire and accommodate the mobility, transportation and communication needs of disabled employees.

Family and Medical Leave Act

Religious organizations are required to allow employees up to 12 weeks of unpaid leave each year on account of certain medical and family needs.

The Occupational Safety and Health Act

By law, churches are required to follow OSHA's regulations for safe and healthy work conditions.

Remember, many of these laws only apply to churches that employ the required number of staff. Read the rest of this chapter to learn the specifics.