Overtime Rules Apply to Most Ministries

The new overtime rules which go into effect on December 1, 2016 will affect most churches and ministries.  The new ruling will increase exempt employee minimum salary level to $913.00 per week ($47,476.00 per year).  If you have an employee doing exempt employee duties and being paid less than $47,476.00 you will need to do either: (1) raise the salary to the new minimum or (2) reclassify the employee as non-exempt which will make the employee’s pay subject to minimum wage rules and overtime pay.

The Department of Labor evaluates individual coverage under Fair Labor Standards Act (FLSA) on a case by case basis.  They look at whether the employee is engaged in interstate commerce on a regular and recurrent basis.  “Interstate commerce” is defined broadly enough to include interstate telephone calls, interstate mail, ordering or receiving materials across state lines.

Most ministries classify their employees as non-exempt or exempt employees.  Basically non-exempt employees are paid hourly and are subject to minimum wage laws and overtime rules.  Exempt employees are paid a salary and are not eligible for overtime.  Clergy (ordained or functioning in a religious capacity) are generally exempt from federal wage and hour rules.

Exempt employee must satisfy three tests: (1) Salary test—paid by salary; (2) Salary level test —after December 1, 2016 having an annual salary of $47,476.00; and (3) Primary Duties test—–perform executive, administrative,  or professional job duties. Failure to meet all 3 of the tests mean the employee would be considered as non-exempt.  Paying a non-exempt employee a salary does not eliminate minimum wage payments and overtime.

Clergy by the courts have been declared exempt from federal wage and hour laws under the ‘ministerial exemption.’  The ministerial exemption is intended to apply only to pastors, ministers, or other ordained employees or who function in a similar religious capacity.

You need to consult your local attorney to be able to make sure you are in compliance with all federal and state employment laws.  As grandma used to say, ‘On ounce of prevention is worth a pound of cure.’

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