7 Things that Churches Should Know About the New Overtime Regulations

What the New Overtime Regulations Mean for You and Your Organization

This is a guest post by Ryan Hutchinson. Ryan serves as Executive Vice President for Operations at Southeastern Baptist Theological Seminary in Wake Forest, NC. Follow Ryan on Twitter at @rrhutch.

Some big news just came out of the United States Department of Labor about overtime pay.

Overtime pay is where certain employees must be paid 1.5 times their normal rate for any hours worked beyond 40 hours in a work week. Yesterday the Department of Labor released an update to the overtime regulations under the Fair Labor Standards Act (FLSA) on who is and is not eligible to receive overtime pay.

Here are some things you should know about the new regulations and existing regulations that still apply:

  1. Churches are not exempt. While there are some very limited exceptions, church employees are not exempt from overtime regulations.
  2. There is a ministerial exemption (sort of). The FLSA does not specifically provide a ministerial exemption, but some case law applies a ministerial exemption to wage and hour laws. In short, there is no definitive answer to this, especially if a minister does not meet the minimum salary requirements.
  3. There is a new minimum salary level. This is actually the only provision that is new. The former salary level was $23,600 per year. The new salary level as of December 1, 2016, is $47,476. The general rule is that anyone making under that amount per year is overtime-eligible.
  4. Employees cannot volunteer their time. Any employee or employer cannot get around the rules by the employee “volunteering” any hours worked in a week over 40, if what they are volunteering for are the same duties for which they are getting paid.
  5. Compensatory (Comp) Time is not legal. In order to get around overtime rules, you cannot offer time off in a future week for work done in the current week beyond 40 hours. You can adjust the scheduled work hours for an employee during the current week to maintain their work hours at 40 or under.
  6. Averaging hours is not legal. You cannot average an employees work hours over a period of time in determining if they are working more than 40 hours a week. Calculations are done on a single work week (7 consecutive days).
  7. Preschool or Daycare Teachers might be exempt – If you run a preschool or daycare, then employees that work in those areas whose primary duty is teaching, are exempt from the overtime rules. The Department of Labor’s Fact Sheet #46 covers details on this exemption.

Churches should pay close attention to the new and existing Department of Labor Regulations dealing with overtime, and determine how their staff members fit into the wage and hour requirements of the FLSA. A church could always benefit from seeking the legal advice of an attorney that specializes in wage and hour issues.

Note: This post is not intended to communicate legal advice. A qualified attorney should be consulted for legal opinions.

What Churchgoers Should Do If Churches Lose Tax Exemption Status

Please note: I reserve the right to delete comments that are offensive or off-topic.

Leave a Reply

Your email address will not be published. Required fields are marked *

29 thoughts on “7 Things that Churches Should Know About the New Overtime Regulations

  1. As an HR professional serving in ministry that has been working on this for a year churches with preschool and Daycares need to be very careful how and who they classify as a Teacher. I encourage churches to review very carefully their employee policies.

    • Bert,

      You are correct that churches shouldn’t play fast and loose with classifications.

      Thanks,

      Ryan Hutchinson

    • Bart, I am the Administrator at a church. My question is-are ministers exempt? From what I have read the are NOT. If this is the case, does their whole package make up their salary, or just the amount designated “salary”?

    • Ricky,

      Good question. The way in which they are paid (i.e. Hourly vs. Salary) doesn’t matter. It is how much they are paid that matters.

      Ryan Hutchinson

    • Geoff:

      For those whose primary job is teaching, they can fall under the exemptions listed in Fact Sheet #46 that is linked in the post. However, for anyone whose primary job is not teaching they would have to first meet the salary test and then the subsequent tests to be considered exempt employees.

      Thanks,

      Ryan Hutchinson

  2. Before we start demonizing paying people what they deserve, consider this, 1.3 million LEGAL workers earn at or just bellow minimum wage. I find it difficult to understand, much less Christ-followers complaining that they might be required to pay people a living wage! Read the book of James 5: 4″ Look ! The wages you failed to pay the workers who mowed your fields , are crying out against you. The cries of the harvesters have reached the ears of the Lord Almighty.” First Timothy 5:18, “Do not muzzle the ox while je is treading out the grain and the worker deserves his wages.” When you decide to pay people less than they are worth because it cuts into your bottom line, you don;t have a budget problem. You have a heart problem.

    • Julie:

      You are right that people should be paid a living wage. It is important to keep in mind that the overtime issue and this post are not dealing with someone not being paid a living wage. This are rules that apply to anyone making under $47,476 a year.

      Thanks,

      Ryan Hutchinson

    • Bryan:

      You are correct. However, the issue comes down to what engagement in interstate commerce means. It has typically been interpreted that if an employee makes calls to out-of-state locations or purchasing products from out-of-state on behalf of the charity that they are involved in interstate commerce.

      So while a non-profit my fall under the “enterprise coverage” exemption, most will find it hard for a non-profit employee not fall under the “individual coverage” rules.

      Thanks,

      Ryan Hutchinson

      • I’m not sure if that is exactly right because the Fact Sheet also says that charitable contributions don’t count toward the $500,000 minimum amount to be covered. Few churches would have that much income that is not from charitable contributions.

        • Erik:

          I saw this reply and just finished responded to your other comment below. My full response below should help. One of the statements that gives more clarity on this from the DOL is “As discussed above, employees of non-profits that perform only charitable activities or that make less than $500,000 a year from business-purpose revenues are only entitled to overtime if they engage in interstate commerce themselves in the course of their job duties.” This is from the document I linked to in my response below.

          So the interstate commerce issue comes into play on whether someone falls under individual coverage regardless of if the non-profit is exempt from enterprise coverage.

  3. Hey Art, sorry to say that this article appears to be incorrect. Fact Sheet 14 from the Department of Labor says: “In determining whether or not a non-profit organization is a covered enterprise, the Wage
    and Hour Division will consider only activities performed for a business purpose.
    Charitable, religious, educational, or similar activities of organizations operated on a nonprofit
    basis where such activities are not in substantial competition with other businesses
    do not result in the organizations being considered covered enterprises. For a non-profit
    organization, enterprise coverage applies only to the activities performed for a business
    purpose; it does not extend to the organization’s charitable activities.
    Income from contributions, membership fees, dues (except any part which represents the
    value of a benefit, other than of token value, received by the payer), and donations (cash
    or non-cash), used in the furtherance of charitable activities, are not considered in
    determining whether an organization has met the dollar threshold required for FLSA
    enterprise coverage.”

    Feel free to correct me if I’m wrong, but it would seem to be very clear that churches are not included. Read the entire fact sheet at https://www.dol.gov/whd/regs/compliance/whdfs14a.pdf

    • Erik:

      Thanks for the comment. This is one portion of the guidance from the Department of Labor. It applies to what they call “enterprise coverage”. However, it does not exempt a non-profit from dealing with overtime in what the Department of Labor calls “individual coverage”.

      Both of the are covered in a document that was prepared by the Department of Labor that they have posted online regarding the new overtime rules (https://www.dol.gov/sites/default/files/overtime-nonprofit.pdf). This communicates the same information regarding enterprise coverage and individual coverage that you posted. In short, being exempt from enterprise coverage doesn’t trump having to deal with staff that fall under individual coverage. You will see in the link I provided that on the bottom of the first page the DOL says, “it is likely that many employees of non-profits are entitled to FLSA protections.”

      So while a non-profit might be exempt from enterprise coverage because of the source of income coming from charitable enterprises, if any particular employee of a non-profit engages in interstate commerce on behalf of the charity then FLSA rules apply. As mentioned in the reply to the previous comment, a non-profit might be able to find an employee who is not engaged in interstate commerce, but the chances are small in most cases.

      Thanks,

      Ryan Hutchinson

        • Well not just any employee of a non-profit engaging in interstate commerce. Isolated occasions don’t count. DOL says it has to be a “substantial” amount of time performing the intestate commerce work… whatever “substantial” means. It seems very much like a case by case basis.

  4. Here’s a simple question that I can’t find the answer for: Is the $47,476 Total Compensation or just Salary?

    If a church employee is paid $30,000 in Salary and $20,000 in Benefits (Health Insurance, Retirement, etc.) are they eligible for Overtime Pay?

    Thanks for the help!
    Neil

  5. What about teachers at a parochial school? Most are salaried, teach for 8 hrs. a day, then have preparations for the next day, required staff meetings, papers to check, grade, and record, parent teacher conferences, research for lessons, etc. A teacher’s job is never a 40 hr. week. Even in the summer, teachers make preparations for the coming school year, attend conferences, etc. Most parochial teachers’ salaries would fall below $47,000.

  6. How will the new ruling affect church employees cleaning the church on 15 hours per week? Salary vs hourly?

  7. How do the new guidelines affect staff non-exempt staff that accompany kids on a summer camp trip? Technically they will be on duty if a camper in the middle of the night gets sick. How about travel time to and from camp?

  8. I work as a teacher assistant in a half day christian preschool. They pay me as an exempt employee but am essentially making $12.00 per hour for a 12 hour work week. The problem is that on days when they want me to substitute for another teacher or assistant for an additional four hour day, they have a policy of $25.00 per day for substitute pay. I am doing the same duties that I do on my normal schedule but being paid less than half my normal hourly rate when I substitute. This was not in my contract I signed about agreeing to this substitute pay schedule. Is this legal as long as they do not pay me less than minimum wage for each work week once my pay is averaged out?