Federal wage and hour laws provide an exemption for pastors and other people who hold key roles within your ministry.
Known as the “white-collar exemption” to the Fair Labor Standards Act, this provision affects people with executive, administrative, professional, and creative duties.
To be exempt from federal overtime rules, an individual must pass all three of the following tests. If an employee fails any one of them, the person is an hourly worker who is entitled to earn the minimum wage and overtime pay.
Salary Level Test — Employees must earn at least $684 a week ($35,568 for a full-year worker).
Salary Basis Test — Employees must earn a salary, that is, a guaranteed minimum amount of money that will be paid in any week that the person performs “any” work, regardless of the quality or quantity.
Duties Test — Employees must perform certain job duties. This is where most mistakes are made. Just because a person’s job title includes the word “administrator” or “manager” doesn’t mean he or she performs the job tasks required for exempt status.
There are four types of duties: executive, administrative, professional, and creative professional.
EXECUTIVES MUST:
Primarily perform management duties.
Regularly supervise at least two full-time equivalent employees (not volunteers).
Have authority or significant influence in hiring, firing, discipline, and promotion decisions affecting employees.
ADMINISTRATORS MUST:
Primarily perform office or non-manual work related to the ministry’s management or business operations. Examples: business administrators, daycare directors, school principals.
Use “discretion and independent judgment” in making decisions regarding significant matters. (Most support staff and clerical workers don’t meet this standard.)
PROFESSIONALS MUST:
Do work requiring advanced knowledge in a field of science or learning, such as theology, teaching, accounting, or law. Examples: clergy, teachers.
CREATIVE PROFESSIONALS MUST:
Do work involving invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor. Examples: musicians, writers, actors.
If a ministry were to misapply the white-collar exemption, the penalty could be quite steep. For example, if a ministry mistakenly labels its secretarial position as exempt, and the employee regularly works more than 40 hours a week, the secretary could be entitled to several years’ worth of unpaid overtime pay.
In addition to the white-collar exemption, the courts have created a “ministerial exception” that exempts “clergy” from federal wage and hour laws. This exception is pretty straightforward when applied to traditional “clergy” positions. However, it can become murky when applied to positions not traditionally or clearly associated with “clergy.”
Therefore, it’s a good practice to seek assistance from a local attorney when considering these questions and making a final determination about whether any exemptions apply to people within your ministry.
Here’s where to find more information about overtime and minimum wage rules.
The information 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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