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  • Writer's pictureMichelle R Brown

Unraveling the Mystery of Church Employees and Overtime Rules

As with anything that relates to the Federal government, not much is crystal clear and easy to understand, even when it is in writing. I recently had someone question an episode I did on church employees and who needed to abide by overtime rules. After doing further research, I learned something new and, of course, I have to share that with you because I can’t learn something cool and not tell you about it. So, I hope you’re ready to add another piece of church finance knowledge to that beautiful brain of yours. 


First, here is today’s quote by Greek Philosopher Aristotle, “We are what we repeatedly do. Excellence then, is not an act, but a habit.” 


Now, for today’s topic we will be discussing Fact Sheet 14A from the Wage & Hour Division of the United States Department of Labor. Fact Sheet 14A is subtitled “Non-Profit Organizations and the Fair Labor Standards Act (FLSA).” The Fact Sheet explains how employees are covered by this protection and just what it offers. First let’s state what protections the Act offers:

  • Minimum wage amounts

  • Overtime regulations

  • Record keeping requirements

  • Child labor standards


The objection to the advice I gave was that Non-Profit Organizations are exempt from the FLSA and are therefore not subject to overtime and minimum wage rules. There are two ways that employees meet the qualifications to be covered… 


#1 Enterprise Coverage


This type of coverage is for employees who work for businesses that generate at least $500,000 in annual Sales revenue. Non-profit organizations generally do not qualify for this coverage unless they actually engage in commercial activity that generates business income. Charitable donations are not considered business income. So what would be considered business income? A hospital gift shop or a clinic that provides low-cost medical services for a fee. The caveat here is that the income must be generated from activities that are operated for a business purpose and from the organization’s charitable activities. 


Here is the exact example used on the Fact Sheet:


A non-profit animal shelter provides free veterinary care, adoption services, and shelter for homeless animals (charitable activities). In addition, the shelter provides veterinary care for a fee to customers (commercial activities). If the revenue generated from the organization’s commercial activities is at least $500,000 in a year, the employees engaged in the commercial activities are protected by the FLSA on an enterprise basis. Employees of the organization’s charitable activities are not covered on an enterprise basis since those activities do not have a business purpose.


Now for the second way employees are covered under this Act, and the one that you most need to remember…


#2 Individual Coverage


Under this coverage, employees are entitled to its protections if they are engaged in “interstate commerce or in the production of goods for interstate commerce, or in any closely-related process or occupation directly essential to such production.”


What does that mean? If you have employees that do any of the following, they are entitled to protection.

  • Make/receive phone calls to anyone out of state

  • Ship/mail materials to another state

  • Transport persons or property to another state


Here is another example from the Fact Sheet:


Examples of employees who are involved in interstate commerce include those who: produce goods (such as a worker assembling components in a factory or a secretary typing letters in an office) that will be sent out of state, regularly make telephone calls to persons located in other states, handle records of interstate transactions, travel to other states on their jobs, and do janitorial work in buildings where goods are produced for shipment outside the state.


As you can see, it’s hard to say that your church employees don’t fall under the FLSA protections. Unless you have employees that don’t talk on the phone, send/receive emails, order supplies online or use supplies ordered in from another state, your employees ARE protected and must abide by the overtime regulations, minimum wage rules, record keeping requirements (this means tracking their hours/time cards) and child labor standards. 


You also may wonder about Volunteers. That’s covered on this Fact Sheet as well. There are three things you need to remember about volunteers:


  1. Individuals are NOT allowed to volunteer in commercial activities run by a non-profit organization (ex. Gift shop). 

  2. Volunteers are also not allowed to displace regular employed workers or perform work that would normally be done by a paid employee. For example, I can’t have volunteers at my store.  Another example would be firing your church bookkeeper in order to have a volunteer take over the duties.

  3. Paid employees of a Non-profit (church) are not allowed to volunteer for the same type of services that they are paid to provide as an employee. For example, the church secretary cannot work her paid hours/day then volunteer to come in and record business meeting minutes as it is the same type of work.


I hope you found this deep dive into church finance regulations enlightening. Remember, knowledge is power, especially when it comes to navigating the twists and turns of federal rules. Here’s to continuing efforts to keep those church finances in check and to never stop seeking knowledge!


So until next time my friend, let’s all strive to make an impact and not just an income. Take care and remember to always look your best, do your best and be your best.


To hear the podcast episode for this topic check out the Bookkeeping with a Purpose podcast on your favorite podcast app or here

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