Complete Story
09/20/2016
Additional clarification regarding the FLSA ruling taking effect Dec 1, 2016
The synod's accountant, Joy Hacker, did some research and developed the following guidelines for our congregations as you determine what impact, if any, the Fair Labor Standards Act will have on your congregation. A link to the original letter from our synod's attorney is also provided for your reference.
FAIR LABOR STANDARDS ACT-: Impact on Churches in a Nutshell
Much has been reported in the press recently regarding changes to the Fair Labor Standards Act (FLSA). The summary below may be helpful in discerning your church’s responsibility under FLSA, both currently and effective on the December 1, 2016 change date. Only the most common situations for churches are included; please check with your own legal counsel regarding your specific circumstances.
1st POINT: EXEMPT VS. NON-EXEMPT
For each employee, a church must start by determining whether that employee is exempt or non-exempt for FLSA purposes. All employees are non-exempt unless they meet the requirements for a specific exemption; recordkeeping and overtime provisions apply to all non-exempt employees.
(No change was made to this provision in 2016.)
2nd POINT: EXEMPT CLERGY EMPLOYEES
Clergy generally are exempt from FLSA. Although this exemption is not specifically stated in FLSA regulations, it was specifically recognized in a 2012 Supreme Court case.
(No change was made to this exemption in 2016.)
3rd POINT: EXEMPT NONCLERGY EMPLOYEES
In church settings, nonclergy employees are typically only exempt under FLSA if they qualify under one of the following scenarios:
Scenario A: No Interstate Commerce
Employees whose duties do not include interstate commerce are exempt from FLSA provisions.
Interstate commerce is defined as regular work duties that include business interaction with other states. Examples include:
- Making or receiving interstate telephone calls or email messages
- Using the internet
- Typing, assembling, or mailing documents to other states
- Ordering or receiving supplies from other states
- Business travel to other states
Positions that may be exempt under this scenario could include organist, choir director, or janitor. Positions generally not qualifying for exemption under this scenario would likely include secretary or bookkeeper.
Scenario B: Administrative Exemption
Employee meets all four of the following requirements:
- Compensation is paid on a salary basis,
- Annual salary is at least $23,660 (increases to $47,476 on December 1),
- Primary duty must be performance of office or non-manual work directly related to management of church business operations, AND
- Primary duty includes exercise of discretion and independent judgment with respect to matters of significance.
In a church setting, an office manager might qualify under this exemption.
Scenario C: Professional Exemption
Employee meets all four of the following requirements:
- Compensation is paid on a salary basis,
- Annual salary is at least $23,660 (increases to $47,476 on December 1), AND
- Primary duty must be performance of work requiring advanced intellectual knowledge in a field of science or learning, acquired by prolonged course of specialized instruction (normally a degree beyond a Bachelor Degree level).
In a church setting, an Associate in Ministry might qualify under this exemption.
(The only change to the provisions in this section in 2016 is the increase in annual salary under Scenarios B and C.)
4th POINT: DEFINITIONS
Non-exempt: Any employee who is subject to FLSA recordkeeping and overtime rules. This includes all nonclergy employees who do not qualify for an exemption under Scenarios A, B, or C above.
Work week: Any seven consecutive days may be designated as the employee’s regular work week. The work week does not need to coincide with the calendar week.
Overtime Hours: Any hours worked in excess of 40 during a single work week by a non-exempt employee. Hours worked for this purpose includes only time actually worked (e.g. vacations, holidays, and sick leave are excluded).
Comp. Time: Compensatory time off may be provided to a non-exempt employee in lieu of overtime pay only if provided during the same work week that extra work hours were incurred. Overtime hours must be paid monetarily on employee’s next pay date.
5th POINT: NON-EXEMPT HOURLY EMPLOYEES
All non-exempt hourly employees:
- Must follow recordkeeping requirements (see 7th point below).
- Must be paid at least the federal minimum wage rate (currently $7.25 per hour) or the applicable state minimum wage rate, whichever is higher. Ohio’s current minimum wage rate is $8.10 per hour.
- Must be paid 1.5 times their normal hourly rate for all overtime hours in any work week.
(No change was made to this provision in 2016.)
6th POINT: NON-EXEMPT SALARY EMPLOYEES
All non-exempt salary employees:
- Must follow recordkeeping requirements (see 7th point below).
- Must be paid a salary that is equal to or above the minimum hourly wage rate (see 5th point above).
- Must be paid 1.5 times their normal hourly rate for all overtime hours in any work week.
(No change was made to this provision in 2016.)
7th POINT: WEEKLY RECORDKEEPING REQUIREMENTS
All non-exempt employees, both hourly and salary, must submit time reports at least weekly. The reports normally must include the total number of hours worked each day; however, an employee working a fixed schedule with minimal deviation may instead report only deviations from the regular schedule.
(No change was made to this provision in 2016.)
SUMMARY
This is a good time to review the exempt or non-exempt status of your church employees. Although churches often employ part-time staff members who are not in danger of incurring overtime pay, some of them may be subject to the recordkeeping requirements. See the following document for a full discussion of the church’s recordkeeping responsibilities:
Recordkeeping Requirements under FLSA
www.dol.gov/whd/regs/compliance/whdfs21.pdf
While most provisions under FLSA have not changed, the increased minimum salary level for certain exemptions may require some advance planning in order to remain in compliance. You will want to consider any financial impact to the church; if the new rules will result in increased cost, options discussed in the following document may be helpful:
FLSA Guidance for Non-Profit Organizations:
www.dol.gov/whd/overtime/final2016/nonprofit-guidance.pdf
The Department of Labor has also issued fact sheets on various topics that may be useful. You can access them at:
www.dol.gov/WHD/fact-sheets-index.htm
ANALYSIS OF CHURCH EMPLOYEES FOR FLSA
Follow these questions for each employee until you reach “exempt” or “non-exempt”
Question 1: Is employee a pastor?
If yes: EXEMPT
If no: Go to Question 2
Question 2: Is employee a teacher in church school?
If yes: EXEMPT
If no: Go to Question 3
Question 3: Is employee involved in interstate commerce (see Scenario A above)?
If no: EXEMPT
If yes: Go to Question 4
Question 4: Is employee paid on salary basis?
If no: NON-EXEMPT
If yes: Go to Question 5
Question 5: Is employee’s salary at least $23,660 per year ($47,476 per year starting December 1)?
If no: NON-EXEMPT
If yes: Go to Question 6
Question 6: Do employee’s duties qualify for exemption under Scenario B or C above?
If yes: EXEMPT
If no: NON-EXEMPT
Above information is provided for informational purposes only and should not be relied upon for full disclosure of FLSA regulations. Please contact your legal counsel for assistance.
The following note to the synod was distributed on August 23, 2016:
A note to the synod...Overtime exemption regulations information
