New minimum salary levels announced by the Department of Labor on April 23, 2024, expands overtime protections for millions of workers—including 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 July 1, 2024, the salary threshold will increase to an annual salary of $43,888. A second phase increase of $58,656 will be effective on January 1, 2025.1
The July 1 increase updates the present annual salary threshold of $35,568 used in the 2019 overtime rule update.
On 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.
For highly compensated employees to remain exempt, the July 1 increase raises their salary from $107,432 to $132,964. On January 1, 2025, the new methodology will raise the salary level for this group to $151,164 annually.
Starting July 1, 2027, salary thresholds will update every three years, by applying up-to-date wage data to determine new salary levels.
Ministries should audit their employee roster to determine if any are now eligible for overtime under the new ruling:
Ministries governed by the FLSA must classify their employees as either non-exempt or exempt. Non-exempt employees must be paid minimum wage, and they also must be paid overtime if they work more than 40 hours in a workweek. Some states, such as California, also require overtime pay for time worked over eight hours in one day.
By contrast, exempt employees generally are paid on a salary basis and are not eligible to receive overtime. Clergy—those who are ordained or who function in a similar religious capacity—have been held by some courts to be exempt from federal wage and hour laws.
An exempt employee must meet the following three tests:
Salary basis test: This 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: This test requires that an exempt employee be paid at least the FLSA minimum salary amount. As of July 1, 2024, this amount changes to $43,888 a year or $844 a week. Beginning January 1, 2025, the annual salary threshold increases to $58,656.
Primary duties test: This 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 can meet the primary duties test but not pass the salary basis test, or pass the salary basis test but not satisfy the primary job duties test. 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.
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. This article from MinistryWorks, Can a Part-Time Employee be Paid a Salary? helps explain the issues.
If you currently have an employee performing exempt job duties, and the employee is being paid a salary of less than $43,888 per year, your ministry needs to do one of two things:
Raise the exempt employee’s salary to meet the current minimum salary level. As of July 1, 2024, that amount is $43,888 a year or $844 a week. Beginning January 1, 2025, the annual salary increases to $58,656.
Reclassify the employee as non-exempt. This will subject the employee’s pay to minimum hourly wage requirements and overtime.
Courts have created a ministerial exception that exempts clergy from federal wage and hour laws. It does not appear as though an increase to the minimum salary level would affect the ministerial exception. The ministerial exception is intended to apply only to pastors, ministers, or other employees who are ordained or who function in a similar religious capacity. For non-clergy employees, ministries should follow FLSA rules and classify them as either exempt or non-exempt.
Yes, most ministries are covered by the Fair Labor Standards Act (FLSA), and it is important that your ministry properly classifies employees as non-exempt or exempt. The “enterprise” test and the “individual employee” test are used to determine whether employers are subject to the FLSA. Most ministries are covered by the FLSA under one test or the other.
Enterprise test: Does the Fair Labor Standards Act Apply to our Ministry?
Individual test: Non-Profit Organizations and the Fair Labor Standards Act (FLSA)
Ministry leaders are strongly encouraged to consult a locally licensed attorney to confirm which ministry employees may qualify for the ministerial exception, and any other exemptions from overtime requirements. An attorney who’s familiar with employment law and with your ministry organization will be able to ensure that you are complying with all applicable federal and state employment laws, as well as help you protect your ministry’s interests.
*Note on the Salary Basis Test: Deductions made from wages for such items as cash or merchandise shortages, employer-required uniforms, and tools of the trade, are not legal to the extent that they reduce the wages of employees below the minimum rate required by the FLSA or reduce the amount of overtime pay due under the FLSA.2
Ministries should also pay attention to a proposed rule that attempts to clarify which perks can and cannot be included in an employee’s “regular rate of pay.” Under current rules, employers are discouraged from offering more perks to their employees as it may be unclear whether those perks must be included in the calculation of an employees’ regular rate of pay. The proposed rule looks to confirm that employers may exclude perks such as wellness programs, payment for unused benefit time, and bonuses.
1"Frequently Asked Questions - Final Rule: Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees." U.S. Department of Labor, Wage and Hour Division, https://www.dol.gov/agencies/whd/overtime/rulemaking/faqs#flsa29. Accessed 24 April 2024.
2 “Digital Reference Guide to the Fair Labor Standards Act.” U.S. Department of Labor, Wage and Hour Division, https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/Digital_Reference_Guide_FLSA.pdf. Accessed 24 April 2024.
Updated April 24, 2024
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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