By Keith Cox
Undoubtedly, you have heard something about new overtime rules.Reaction from church leaders has been mostly one of confusion and, perhaps, dismay, i.e. “Do we need to pay our youth director overtime when she takes our kids to camp for a week?”
The answer is, at least at this point, is “Maybe.”
Ultimately, it will be up to each church or church entity to determine whether the Department of Labor (DOL) rules apply. But here is some basic information to help in making this decision.
The Fair Labor Standards Act (FLSA) establishes a minimum wage, overtime pay, record keeping, and youth employment standards . The DOL has the authority to define the rules of the FLSA through regulations.
In general, hourly-paid workers or employees who earn below a certain amount - non-exempt workers - are protected by the act and are to be paid overtime pay at a rate of one-and-one-half times regular pay after 40 hours of work in a work week.
Workers who are not protected – exempt employees – are those that earn more than the regulated threshold amount and are considered to be professional, administrative, or executive employees.
The new rule: effective January 1, 2020, employees who earn less than $684 per week will generally be eligible for overtime pay except …
Ministers are not covered under FLSA regulations. Of course, we must determine who is a minister. Under IRS rules youth directors, ministers of music, children’s ministry directors, unless licensed or ordained and under Episcopal appointment, are not considered to be “ministers.” Whether that same definition applies to the FLSA is uncertain.
Other church workers might be subject to the overtime rules if they meet the “enterprise coverage” or the “individual coverage” criteria.
Most churches will not meet the “enterprise coverage” test. To meet the enterprise coverage test a church (or other non-profit) must have over $500,000 of revenue other than from donations, contributions or grants. Therefore, unless a church has a daycare or school that is not separately incorporated, the church will not be subject to the overtime rules under the enterprise coverage test.
It is, however, under the “individual coverage” test that churches might find that some or all of their employees are covered under the FLSA.
To be covered under the “individual coverage” test, an employee must be engaged in interstate commerce. On the surface, it would seem that church employees are not engaged in interstate commerce, at least as the original drafters of the FLSA back in the 1930s would have defined interstate commerce.
Although it may seem a stretch, employees may be considered to be in interstate commerce if they regularly make phone calls to people located in other states, regularly handle records of interstate transactions (including mail), or regularly travel to other states for business purposes. Even regularly sending emails to persons in another state might be sufficient to make these employees covered employees under the individual coverage test.
Now it must be noted that the General Council on Finance and Administration legal counsel has indicated that the Department Labor is not looking to draw every entity that uses email or that has a website under the purview of the FLSA. If the activities of interstate commerce described above are infrequent, immaterial and trivial, the DOL is probably not going to be making inquiries of your church.
However, it should be noted that if an entity is found to have violated the overtime rules, that employer will be required to pay any overtime pay owed plus a penalty of 100% of that pay.
It is unlikely that we will receive a blanket exemption from the DOL rules. However, as more information and guidance becomes available, we will pass that along as it is received. If you have any questions, please contact me at kcox@ngumc.org or Bruce Cooper at bcooper@ngumc.org.