Effective December 1, 2016
On May 18, 2016, the Department of Labor (DOL) announced changes to the Fair Labor Standards Act (FLSA) “white collar” overtime exemption rules. The final rule strengthens protection for workers by increasing the standard salary level for qualification for overtime exemption from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). There were no changes to the professional duties test to determine if individuals earning at least the standard level qualify for exemption. The new rules simply raise the level before which an employee can be considered exempt from overtime pay.
Is My Church Impacted by the New Rules?
Most churches will not be affected as an entity by these new rules. The new rules apply only to churches with more than $500,000 of revenues from sources other than contributions. Very few of our churches will meet this test. Note, however, that schools and pre-schools are subject to the new rules without consideration of the $500,000 threshold.
Although a church may not be subject to the new rules as an entity, some of its employees may be covered by the new rules if they engage in interstate commerce as part of their job duties. This can be as simple as making or receiving interstate telephone calls, or shipping materials (such as newsletters) to other states. So, some church employees may be impacted even if the church itself doesn’t meet the $500,000 revenue test.
What are the Practical Implications of the New Rules?
Churches and other employers should carefully review the employment classification of all staff to ensure employees are properly classified as exempt or non-exempt. This should include the review of each job description to make sure position duties and responsibilities are accurately described. Some employees currently classified as exempt will likely have to be reclassified as non-exempt as of December 1 if they earn less than $47,476 per year.
Churches should review budgetary plans to ensure that funding is in place for any overtime expected to be due to any non-exempt employees.
Appropriate time records should be kept for all non-exempt employees, and payment should be made for hours worked in accordance with the FLSA. Time reporting can be done on an exception basis; that is, reporting only the time that is not 40 hours of work per week (vacation, sick time, overtime, etc.). Expected hours to be worked and pay rates may need to be evaluated to ensure required tracking can be done and corresponding payment can be made. Overtime will need to be paid for hours worked in excess of 40 per week.
Can Comp Time be Provided in Lieu of Overtime Pay?
As is the case now, comp time can be provided for extra hours worked on a particular day or days, as long as the comp time occurs during the same week. Covered employees that work more than 40 hours in a given week should receive overtime pay at 1.5 times their regular hourly pay rate for those hours in excess of 40. Note that it is important for employers to define the standard workweek, since it will often be different than Monday-Friday for many church employees.
Can Overtime Hours be Donated?
Employees cannot agree to donate overtime hours if those hours are for the same duties and activities performed in their job positions. They can donate hours for considerably different tasks (for example, a church secretary serving food to the homeless).
Do the New Rules Apply to Clergy?
Though there is no exemption for clergy included in the FLSA, some courts have held that the FLSA does not apply to clergy employees. At this point, we believe it is reasonable to conclude that clergy employees can be treated as exempt employees. Specific attention should be given to the applicability of these rules to lay employees of the church.
What Resources are Available to Help Me Learn More About the New Rules?
Resources are available to churches to assist in understanding the new rules and application of the rules in local scenarios. Some of these resources are as follows:
- A white paper from the Legal Department of the General Council on Finance and Administration (GCFA) summarizing the rule changes is available at http://s3.amazonaws.com/Website_GCFA/reports/legal/documents/White_Paper_-_FLSA_Changes_July2016.pdf .
- A Frequently Asked Questions website from the DOL listing almost 50 questions about the changes and the applicability of those changes to employers. Answers to these questions and more can be found at https://www.dol.gov/whd/overtime/final2016/faq.htm
- What determines if an employee falls within one of the white collar exemptions?
- How will employers implement the updated salary level requirement established in this Final Rule?
- I’m paid a salary. Am I exempt from overtime pay?
- Will newly overtime-eligible employees have to record their hours on a daily basis or “punch a time clock”?
- A Fact Sheet from the DOL giving details of the impact of the new rules on non-profit organizations like churches is available at https://www.dol.gov/sites/default/files/overtime-nonprofit.pdf .
- Fact sheets from the DOL to help employers determine exemption based on job duties tests for executives ( https://www.dol.gov/whd/overtime/fs17b_executive.pdf ), administrative (https://www.dol.gov/whd/overtime/fs17c_administrative.pdf ), professional (https://www.dol.gov/whd/overtime/fs17d_professional.pdf ), sales (https://www.dol.gov/whd/overtime/fs17f_outsidesales.pdf ), and computer (https://www.dol.gov/whd/overtime/fs17e_computer.pdf ) employees.
We know that employment in the United Methodist Church is a privilege valued by us all. We want to ensure that we do our best to treat and compensate all of our employees fairly and equitably. To that end, we hope that you find this information on the federal overtime rules helpful. Please contact your Conference Treasurer’s office ( or 602-798-8212) if you have any questions about this notice or resources available to churches in implementing these federal requirements. Thank you.