New rules from the Department of Labor will take effect December 1, 2016. They will significantly decrease the number of employees who might qualify for an exemption from the federal wage and hours laws.
Pastors and ordained or licensed ministers working in the ministry of the church remain exempt under the new rules. They are not subject to overtime or other wage and hour regulations. However, SOME churches may employ individuals who may NOT be exempt under the new rules. The following information is intended to help you determine whether or not individual employees at your church are exempt from the FLSA rules or covered by them.
The FLSA generally applies to (“covers”) employees employed by businesses with annual gross volume of sales made or business done of at least $500,000. Non-profit charitable organizations are not covered enterprises under the FLSA unless they engage in ordinary commercial activities that result in sales made or business done, such as operating a gift shop or providing veterinary services for a fee.
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 non-profit 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. See Fact Sheet 14: Coverage Under the Fair Labor Standards Act (FLSA) for additional information about enterprise coverage.
Employees of employers that are not covered by the FLSA on an enterprise basis may still be entitled to its protections if they are individually engaged in interstate commerce or in the production of goods for interstate commerce, or in any closely-related process or occupation directly essential to such production.
Examples of activities that may result in individual employee coverage include making/receiving interstate telephone calls, shipping materials to another state, and transporting persons or property to another state. The Wage and Hour Division, however, will not assert that an employee who on isolated occasions spends an insubstantial amount of time performing individually covered work is individually covered by the FLSA. See Fact Sheet 14: Coverage Under the Fair Labor Standards Act (FLSA) for additional information about indivudual coverage.
Basic White Collar Exemptions under the Standard Duties Test follow. For all of these, the first standard is that – to be exempt – the employee must be paid at least $47,476 per year ($913 per week). Further requirements are:
- The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise.
- The employee must customarily and regularly direct the work of at least two other full-time employees or their equivalent (for example, one full-time and two half-time employees are equivalent to two full-time employees).
- The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
- The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.
- The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
Professional Exemption. There are several different kinds of exempt “professional” employees. These include “learned professionals,” “creative professionals,” teachers, and employees practicing law or medicine.
The Learned Professional
- The employee must primarily perform work that either requires advanced knowledge in a field of science or learning, usually obtained through a degree, or that requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.
- The employee’s primary duty must include work requiring the consistent exercise of discretion and judgment.
The Creative Professional
- The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
The exemptions provided by FLSA Section 13(a)(1) apply only to “white collar” employees who meet the salary and duties tests set forth in the Part 541 regulations. The exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy. FLSA-covered, non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the FLSA, and are not exempt under the Part 541 regulations no matter how highly paid they might be.
Here is a non-profit reference to the federal DOL website with additional details: