New minimum salary levels announced by the Department of Labor on April 23, 2024, expand overtime protections for millions of workers—including some ministry workers—currently paid a salary. The rule increases the salary thresholds required to exempt a salaried bona fide executive, administrative, or professional employee from federal overtime pay requirements.
Effective January 1, 2025, the salary threshold will increase to an annual salary of $58,656.1
July 1, 2024, the first standard salary level increase of $844 per week (equivalent to $43,888 per year) went into effect. Previously, the annual salary threshold was $35,568.
January 1, 2025, the rule’s new methodology takes effect, setting the standard salary level at the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region. This will result in the additional increase on this date of a salary level of $1,128 per week or $58,656 per year.
July 1, 2027,salary thresholds will update every three years, by applying up-to-date wage data to determine new salary levels.
In most cases, exempt employees earning less than the current standard salary level threshold must be classified as non-exempt employees, subjecting them to overtime rules.
The ruling will impact all organizations, including some Christian churches and ministries. Ministry leaders should:
Ministries should audit their employee roster to determine if any could be eligible for overtime under the new ruling:
The FLSA may cover ministries and their employees in two ways:
Most ministries do not qualify as covered enterprises under the FLSA, as they are neither schools nor businesses competing in the commercial sector. If, however, a ministry conducts business operations that compete with commercial entities—such as running a coffee shop or renting out space to non-members—it would likely be deemed a covered enterprise due to these commercial activities if certain sales or business volumes are met.
Nonetheless, individual employees within these ministries may still be eligible for FLSA protections if they meet the criteria for individual coverage. The Department of Labor’s (DOL) Wage and Hour Division assesses this on an individual basis, determining if an employee frequently engages in interstate commerce. In essence, this implies that while the organization as a whole may not be considered a covered enterprise, certain employees within the organization could still be protected under the FLSA.
Once FLSA coverage is determined, ministry employers must classify each covered employee as either non-exempt or exempt based on various factors applied to each employee’s specific job duties.
Non-exempt employees: must be paid minimum wage, and they must be paid overtime if they work more than 40 hours in any 7-day work week.
Exempt employees generally are paid on a salary basis and are not eligible to receive overtime. Some courts have held that clergy (those who are ordained or function in a similar religious capacity) are exempt from federal wage and hours laws. An exempt employee should meet all three of the qualifying tests outlined below.
An exempt employee must meet all of the following three tests:
Salary basis test - requires that an exempt employee be paid a salary, and it limits the types of deductions that can be made to the employee’s salary.
Salary level test - requires that an exempt employee be paid at least the FLSA minimum salary amount. On January 1, 2025, the salary level will be $1,128 per week or $58,656 per year.
Primary duties test - requires that an exempt employee typically perform executive, administrative, professional, or creative professional job duties. It’s important to note that a job title such as “office manager,” is not a determining factor. The employee’s job duties must pass the primary duties test.
An employee may satisfy the primary duties test without meeting the salary basis test or vice versa.Employees that fail to meet all three of these tests generally must be considered non-exempt and must be paid at least minimum wage and overtime.
There are some employees who are exempt from both the minimum wage and overtime pay provisions. Teachers, for example, in most cases, qualify for the exemption if their main responsibility involves imparting knowledge through teaching, tutoring, instructing, or lecturing, and they are employed by an educational institution to perform these duties.1
To learn more about Teachers, Daycare Centers, Preschools, and the FLSA, check out the U.S. Department of Labor’s #17S: Educational Establishments and #46: Daycare Centers and Preschools fact sheets.
Some states and communities have even stricter minimum wage and overtime rules. For example, many states have a higher minimum wage than the one required by the federal government, and some require an overtime rate to be paid after the first eight hours of work on any given day. Your state labor office can provide information about these rules.
Another classification that isn't specifically straightforward is the "Ministerial Exception." Often, ministers and clergy are categorized under the administrative, executive, and professional exemptions of the FLSA, collectively referred to as white-collar exemptions. The interplay between the FLSA and its application to religious employees, particularly employees who aren't Senior or Associate Pastors, can be a complex issue.
Several courts have created a ministerial exception that exempts clergy from employment-related laws, including minimum wage and overtime pay requirements. The exception is intended to apply to pastors, ministers, other ordained employees, or those who function in a similar religious capacity. Courts have used different criteria to evaluate who should be considered a minister for purposes of the exception.
In the 2012 U.S. Supreme Court landmark decision, Evangelical Lutheran Church and School v. EEOC, the Court refrained from providing a specific definition of who should be considered a minister for the purpose of the exception.2 Instead, the justices outlined three factors that courts should consider:
When applying these criteria, roles such as senior pastors, associate pastors, and similar positions within a church or ministry are likely to meet the three-factor test. Conversely, custodial staff, secretarial staff, and others whose jobs primarily support ministry work rather than directly performing ministry tasks are unlikely to be considered ministers for the exception’s purposes based on the Hosanna-Tabor case.
In 2020, the U.S. Supreme Court reaffirmed the ministerial exception in the Our Lady of Guadalupe School v. Morrissey-Berru case and, some would argue, broadened it to provide more deference to religious employers in deciding whether an employee’s role involves conveying the church’s message and fulfilling its mission, as well as emphasizing the importance of allowing religious organizations to make employment-related decisions in accordance with their sincerely held beliefs.3
The DOL’s Wage & Hour Division’s Opinion Letter (FLSA2021-2) serves as a crucial reference in this matter, providing detailed insights into the ministerial exception.4 The letter underscores that there isn’t a universal checklist for identifying if an employee qualifies for this exception. Ordination or specific job titles are not prerequisites for an employee to qualify. The determination is made individually, taking into account all relevant circumstances of each employee to assess whether each specific role fulfills the core purpose of the exception. Ultimately, whether an employee is considered a minister hinges on their role and duties in advancing the church's mission and communicating the church's message.
These judicial decisions, along with guidance from the DOL’s Wage & Hour Division, clarify that determining whether an employee qualifies for the ministerial exception does not rely on a standard checklist. It does not require ordination or specific job titles but rather calls for a tailored assessment of the employee’s duties in relation to the religious organization's goals and messaging.
If you currently have an employee performing exempt job duties, and the employee is being paid a salary of less than the threshold amount, your ministry needs to do one of two things:
Raise the exempt employee’s salary to meet the current minimum salary level.
Reclassify the employee as non-exempt. This will subject the employee’s pay to minimum hourly wage requirements and overtime.
Paying a part-time worker a salary. While employers can pay a non-exempt employee a salary without violating the FLSA, this often results in confusion. Employers must vigilantly monitor hours worked and keep accurate records to ensure the non-exempt employee earns a minimum wage and applicable overtime.
Ministry leaders are strongly encouraged to consult a locally licensed attorney to confirm they are in compliance with the FLSA and any applicable state and local laws. Several state and local jurisdictions have established their own wage and hour laws, including their own salary and duties tests to determine if an employee is exempt from overtime according to regulations. As a general rule, if the state law is more protective (meaning it demands a higher salary or has more stringent duties tests), then employers should comply with the state law.
Additionally, it is important to note that DOL Opinion Letters can be used as a good faith defense against FLSA violation claims but are not binding interpretations in a court of law. Interpretations accompanying these opinion letters may change or be rejected with new administrations. Ultimately, a legal opinion from a locally licensed attorney on whether particular employees are exempt from the FLSA is highly encouraged to mitigate potential risks and classifications issues.
The information provided in this article is intended to be helpful, but it does not constitute legal advice and is not a substitute for the advice from a licensed attorney in your area. We strongly encourage you to regularly consult with a local attorney as part of your risk management program.
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