Do church employees qualify for the new rules governing overtime and minimum wages?
In most cases, yes. In order to fully answer the question, there are rules we have to review to determine who qualifies. These rules are very complex and can be confusing unless understood completely.
- The courts have created a ministerial exception that exempts clergy from federal wage and hour laws. It does not appear as though the increase to the minimum salary level will affect the ministerial exception. The ministerial exception is intended to apply only to pastors, ministers or other employees who are ordained or who function in a similar religious capacity.
- For non-clergy church employees, the church should follow the new rules and classify them as either exempt or non-exempt. An exempt employee must meet the following three tests:
- Salary basis test: This test requires that an exempt employee be paid a salary, and it limits the type of deductions that can be made to the employee’s salary.
- Salary level test: This test requires that an exempt employee be paid at least the required minimum salary amount. This is the threshold that the Dept. of Labor will be increasing, effective 12/1/16. Accordingly, nearly all ministry employees who earn an annual salary of less than $47,476 per year ($913 per week) will soon be considered non-exempt and will be subject to minimum wage and overtime.
- Primary duties test: This test requires that an exempt employee typically perform executive, administrative, professional or creative professional job duties. It is important to understand that a job title, such as “office manager,” is not a determining factor. The employee’s job duties must pass the primary duties test.
An employee can meet the primary duties test but not pass the salary basis test, or pass the salary basis test but not satisfy the primary job duties test. Employees that fail to meet all three of these tests generally must be considered non-exempt and must be paid at least minimum wage and overtime. Paying a non-exempt employee a salary does not eliminate the need to pay overtime or minimum wage. If the salaried person works overtime, then the church must pay the overtime.