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Tuesday, September 10, 2024

Does the FLSA Really Apply to Churches?

A pastor recently contacted me wondering about the Fair Labor Standards Act (FLSA) and the ongoing changes to the minimum salary threshold for exempt employees.

The pastor came across a link from the US Department of Labor (DOL) suggesting nonprofits (including churches) are exempt from the FLSA. If that’s the case, he asked, then why the fuss about these changes?

It’s a good question—and one we occasionally get. At first blush, it may seem as though churches and nonprofits have a blanket exemption from the FLSA. But a closer look shows a careful analysis must be made before assuming an exemption applies.

Why? Because the DOL evaluates the applicability of the FLSA in two ways: the employer’s operations, and the individual employee’s activities. More often than not, the FLSA triggers for a church on one or both fronts.

As CPA Elaine Sommerville, the author of Church Compensation, Second Edition, notes:

Many commentators propose that the FLSA does not apply to churches. That may have once been true, but the church of today is not the church of yesterday. Advanced activities easily make the law applicable to most churches, either on an entity level (meaning the FLSA applies to the church operations as a whole) or on an individual employee basis based on the employee’s duties. Given the two ways the FLSA may apply in a church setting, no church should assume the FLSA does not apply to it or to any of its employees.

Warning: Besides federal requirements, every state maintains its own version of the FLSA, either layering additional rules on top of federal rules or applying similar rules where the federal rules don’t apply. The law most favorable to an employee, whether at the state or federal level always applies.

If you missed our webinar last month on these changes, be sure to check out this clip with attorney Dustin Gaines and me exploring the FLSA and the various changes.

The Lord Bless you and keep you,

Matthew Branaugh, Business Owner

Church Law & Tax

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Tuesday, September 10, 2024

Dept. of Labor Rolls Back Independent Contractor Test Rules

The new rules undo the Trump-era independent contractor test, and focus on economic independence as the “ultimate inquiry.”