Generally, all employers are subject to the minimum wage requirements and overtime pay requirements of the Fair Labor Standards Act (FLSA) if they meet interstate commerce requirements either corporately or individually. Thankfully, non-profits and churches enjoy some special exemptions under FLSA, some of which may help exempt many churches and religious nonprofits.
There is no blanket exemption for non-profits from FLSA. This is primarily because the FLSA can apply to protect an employee in one of two ways. First, the FLSA can apply to protect all employees of an employer who qualifies as a “business enterprise” that has $500,000 or more in annual gross receipts. Generally, this includes for-profits who are conducting business, such as running a store, manufacturing goods, providing services, etc. Unless a non-profit or church is engaging in similar business-like activity, it will most likely be exempt from enterprise coverage. This means that unless an employee is covered individually (below), all employees who participate in the nonprofit/church’s charitable, non-business-like activities will not be protected by FLSA. [1]
Second, even if the employer is not covered by FLSA as an “enterprise,” the FLSA may protect all those employees who work in interstate commerce as a substantial part of their duties. Although this standard, on its face, appears to apply only to employees who are putting products or services into interstate commerce, its scope is much broader than that. An employee can be considered to be engaged in interstate commerce when they are “regularly using the mails and telephone for interstate communication, or when regularly traveling across state lines while working.” [2] This type of activity has to be a “regular and recurrent” part of the employee’s duties, though the Department of Labor has not established strict rules on how this test can be met, since it is a fact-based analysis. It is clear, however, that de minimis activity, or activity that is not regularly recurring, will not provide an employee with the protection of FLSA’s rules.
The US District Court for the Southern District of New York applied this rule in Bowrin, conducting an “individual coverage” analysis for employees of a Catholic society. The court explained that while the test for individual coverage is a fact-based test:
[T]ypically it is the use of the interstate mails and placement of out-of-state phone calls occurring in the course of conducting an organization’s clerical or administrative business that appear to trigger individual coverage, if “regular and recurrent” and a “substantial part” of the employee’s work. [3]
This rule is even more clearly stated in the Department of Labor’s Field Operations Handbook, describing what kind of work in nonprofits/churches qualifies for individual coverage:
Employees of educational, eleemosynary, or nonprofit organizations may be covered on an individual basis. . . . In addition, employees, such as office and clerical personnel, whose work involves the regular use of interstate emails, telegraph, telephone, and similar instrumentalities for communication across State lines are actually engaged in interstate commerce. [4]
This test can clearly apply to nearly all of a particular nonprofit or church’s employees, since they often use mail, email, phone calls, and travel to connect with churches, offices, employees, affiliates, and partners who are across the United States. It would be difficult to argue that any large portion of employees do not participate in such interstate communication as a regular and substantial part of their duties and work.
Even more significantly, the non-profit or non-business nature of an employee’s work is not relevant to determining whether or not they are covered individually by the FLSA. The Bowrin court explained this clearly:
To the extent CGS [the Catholic Guardian Society] relies on the non-business/not-for-profit nature of the employer’s activities to support its position that plaintiffs are not covered on an individual basis, it is conflating the separate inquiries that apply to enterprise versus individual coverage. The WHD [Wage and Hour Division of the Department of Labor] clearly recognizes that individual employees of nonprofit organizations who do not engage in substantial competition with other businesses may be covered on an individual basis. [5]
In other words, as long as the employees meet the test for performing acts in interest commerce regularly enough as part of their required duties, the fact that their employer is a non-profit, or engaged non-business activities, is irrelevant.
In sum, employees are covered by FLSA’s protections when they take part in, as a substantial and regularly recurring part of their duties, interstate channels of communication. Despite a nonprofit or church being exempt from FLSA’s enterprise coverage, it would be responsible to comply with FLSA requirements for all employees who are subject to the rules for individual coverage. Assuming that FLSA applies, employee classification is an area that needs attention, as significant changes are coming down the pipeline in the near future.
Of course, if the employee is covered by FLSA (either by enterprise or as an individual who regularly and recurrently uses the telephone, internet, or mails for interstate communication or receives, prepares or sends written material across state lines) and also meets the threshold salary amount discussed above, there are three other criteria to review concerning whether they could be exempt from FSLA. FSLA exempts executive, administrative or professional employees who perform specified duties to qualify for these exemptions. Since this is a case by case basis much like the individual who impacts interstate commerce is reviewed, it is beyond this higher level review to assess such case by case situations but we would be glad to review how these categories apply to your employees.
[1] See Jacobs v. N.Y. Foundling Hosp., 483 F. Supp. 2d 251, 266 (E.D.N.Y. 2007) (holding that a non-profit hospital was not subject to enterprise coverage).
[2] Bowrin v. Catholic Guardian Soc’y, 417 F. Supp. 2d 449, 465 (S.D.N.Y. 2006), citing 29 C.F.R. § 779.103.
[3] Bowrin v. Catholic Guardian Soc’y, 417 F. Supp. 2d 449, 468 (S.D.N.Y. 2006), citing 29 C.F.R. § 776.10.
[4] United States Department of Labor, Wage and Hour Division, Field Operations Handbook, 11n01.
[5] Bowrin v. Catholic Guardian Soc’y, 417 F. Supp. 2d 449, 467 (S.D.N.Y. 2006) (internal citations omitted).
Disclaimer: This memorandum is provided for general information purposes only and is not a substitute for legal advice particular to your situation. No recipients of this memo should act or refrain from acting solely on the basis of this memorandum without seeking professional legal counsel. Simms Showers LLP expressly disclaims all liability relating to actions taken or not taken based solely on the content of this memorandum. Please contact Robert Showers, Daniel Hebda at djh@simmsshowerslaw.com or Justin Coleman at jrc@simmsshowerslaw.com for other legal memos and/or to retain Simms Showers law firm for specific legal advice tailored to your greater needs concerning which risk management strategy is best for your church or organization.