There is a white-collar exemption in addition to the ministerial exemption as discussed last month. To be exempt from federal overtime rules, an individual must pass all three of the following tests. If an employee fails any one of them, the person is an hourly worker who is entitled to earn the minimum wage and overtime pay.
- 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.
Under the primary duties test, there are four types of duties as follows:
- Executives, who must primarily perform management duties, must regularly supervise at least two full-time employees (not volunteers); and have authority or significant influence in hiring, firing, discipline, and promotion affecting employees.
- Administrators, who must primarily perform office or non-manual work related to the ministry’s management or business operations. An example would be the business administrator, daycare director, school principal; use “discretion and independent judgment” in making decisions regarding significant matters (Most support staff and clerical workers do not meet this standard).
- Professionals, who do work requiring advanced knowledge in a field of science or learning, such as theology, teaching, accounting or law. An example would be licensed or ordained clergy, qualified teachers, or a qualified accountant.
- Creative Professionals, who must do work involving invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. An example would be musicians, writers, or actors.
If the church were to misapply the white-color exemption, the penalty could be quite steep. For example, if a ministry mistakenly labels its secretarial position as exempt, and the employee regularly works more than 40 hours per week, the secretary could be entitled to several years’ worth of unpaid overtime.