CHICAGO, IL (September 13, 2016) — Rules released earlier this year by the U.S. Department of Labor include a significant change to the salary level used to determine whether non-ministerial church employees must be paid overtime under the Fair Labor Standards Act (FLSA).

Starting December 1, salaried staff at nonprofits and churches must be paid overtime if they are making less than $47,476 annually ($913 weekly). The previous level was $23,600 per year.

The FLSA requires that overtime be paid at 1.5 times the hourly salary for any work done over 40 hours, in a given week. Non-salaried employees already are covered by the FLSA and are not impacted by the rules change.

Some churches may qualify for the “enterprise exemption” but must review guidelines to ensure they meet criteria.

Some positions may be exempt from the overtime rules, but they must meet three requirements: the employee must perform certain job duties (“duties test”), must earn at least $47,476 yearly, and their salary must be a guaranteed minimum.

The “duties test” to determine whether a staff person is exempt from the requirements remains the same. The Department of Labor worksheet #17A offers more detail on which duties are covered by FLSA and which are not.

Church handbooks and policies must clearly state who is considered “ministerial” staff and demonstrate that those positions do have a clear religious purpose. These must be in compliance with the new rules by December 1.

Following is a basic overview of the rules, but churches are encouraged to review the Department of Labor rules and consult local human resource experts, as some state and local regulations may differ from federal requirements.

Most ministers are exempt from the change. Exemptions remain for people doing ministerial functions. People serving in purely administrative capacity (even if ordained) or as musicians are not exempt from the FLSA. Choir directors/worship leaders may be exempt.

Employees cannot volunteer their time for the same duties they are getting paid for as a way to get around the overtime rule.

Averaging hours over several weeks is not legal. Each seven-day week must be considered separately. Weekly work hours can be rescheduled to remain under 40 hours.

Comp time is not allowed. Overtime compensation must be paid.

Preschool or daycare teachers might be exempt. If the church runs a preschool or daycare, then employees who work in those areas whose primary duty is teaching are exempt from the overtime rules. See Department of Labor’s Fact Sheet #46.

Churches have three basic options to adapt to the new rules, said Rebecca Gonzalez, executive director of operations at Covenant Offices.

• Limit employees’ hours to 40 per week.
• Pay the overtime, as it is accrued.
• Raise the employee’s salary above $47,476 a year.

Churches should consider how much overtime is paid to employees to help determine whether to raise the pay level to the minimum, said Gonzalez. It may be more financially advantageous to just pay the overtime, especially when overtime accrual is occasional or seasonal. The overtime should be considered when budgeting salary lines.

Gonzalez also noted that if churches increase salaries, benefits that are set up as percentages of pay also would adjust.

For more information on the change and what it means for nonprofits, download the DOL’s “Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act,” which provides extensive information.