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New Overtime Rules Affect Employers - but Enforcement Placed on Hold

Authored by: Jerry Rich
Date: November 22, 2016
An employer should exercise caution when classifying employees.

On May 18, 2016, the U.S. Department of Labor issued a major update to federal overtime regulations. The “white collar” exemption of the Fair Labor Standards Act (FLSA) was revised upward and tightened. November 22, 2016 Update: A federal judge in Texas has granted a preliminary injunction, blocking enforcement of the salary threshold change for the time being.

Nonprofit organizations, including churches, are not exempt from these rules according to legal advisers.

Workers earning less than $47,476 per year ($913 per week) must receive overtime pay when working more than 40 hours in a work week. Even above this threshold, there are certain tests regarding job duties to be classified as exempt from the minimum wage and overtime guidelines. The new rule, which takes effect on December 1, 2016, at least affects all non-ministerial employees of a church.

While many church law advisers cite a “ministerial exception” existing in DOL opinion letters and court cases, the exception is not specifically mentioned in the regulations. It seems likely that ministers for whom the church legitimately recognizes clergy tax status would meet the criteria for exception. But relying on “ministerial exception” for certain other church staff positions may be less clear and more likely to place the employer at risk. Besides this exception, a church should follow FLSA rules for employees when classifying them as either exempt or non-exempt. It’s advisable for a church to exercise caution in all classifications and be prepared to document the reasons for exceptions or exemptions. (For more information, see the following FCMM article from May 2015 regarding classifying workers.)

Churches may need to check with a qualified employment attorney for specific questions. Please note that state and local laws may impose additional regulations beyond federal rules.

Resource references you may find helpful include: ECFA on New Overtime Regulations, Church Law and Tax, and Brotherhood Mutual Safety Library.