New Overtime Laws Affect Churches

How Obama’s New Overtime Laws Affect Churches

I haven’t found much written yet about how Obama’s new overtime laws affect churches. Will you be ready when they take effect December 1?

New Overtime Laws Affect Churches

Nobody wants their church to be caught off guard when a significant change like this rolls around. I started looking into it, and here’s what I found:

UPDATE: As of Nov 22, 2016, a US District Court granted an injunction against this new law, so everything is in limbo until the court case is settled or the injunction is overturned. Stay tuned!

Part-Time Employees are Not Affected

Part-time employees of churches are already subject to overtime laws, so there’s nothing that really changes here. If they work overtime, you pay them overtime according to their time card.

Just in case you’re not aware, though, there are potentially 2 sets of overtime laws you need to know about. The Feds dictate that non-exempt employees get paid at least time and a half for hours worked over 40 in a week. However, your state may have more stringent guidelines than that.

For instance, here in my State of CA, employees are paid at least time and a half for hours worked more than 8 hours in a day (and double time for time over 12 hours in a day). And the Federal rule of more than 40 in a week still applies. Check out your state’s requirements here.

Highly-Paid Exempt Employees are Not Affected

If you have exempt (“white collar” or “salaried”) employees making $48,000 a year or more, nothing changes here, either. They get paid to get the job done and aren’t subject to overtime. Whether they work 40 or 70 hours in a week, they get paid the same salary.

Exempt Employees in the Middle Catch a Break

Employees affected by the new ruling are those that were full-time exempt but getting paid as little as $23,660 per year. The new minimum salary for an exempt employee is $47,476 per year.

Have you been paying a worship leader or children’s director $36,000 a year for unlimited hours? Not any more.

An exception may be if they have opted out of Social Security and you’re paying them by 1099 as an independent professional/contractor; you’ll want to talk to a tax professional about that.

Your Church’s Options

If you don’t have anyone in that third bracket, then there’s nothing to do. But if you do, here are the options spelled out on the Department of Labor’s website:

  1. Raise salaries [to at least $47,476]
  2. Pay overtime above a salary [record any overtime]
  3. Evaluate and realign employee workload [prevent overtime]
  4. Adjust employee’s base pay [down] and pay overtime [so total compensation remains the same]

What You Can’t Do

Not that you’d be tempted to, but you can’t cut your employee’s hours and get “free overtime” by counting working on Sundays as volunteerism:

Individuals may volunteer time to religious, charitable, civic, humanitarian, or similar non-profit organizations as a public service… They may not, however, volunteer time to their own non-profit employer performing the same type of work for which they are employed.” DOL website

Work with your employees and your Church Board to figure out what works best for the employee and the church. Run it by a CPA or tax professional.In the end, do what’s right by your employees; the worker deserves his/her wages.