DOL Boosts Minimum Salary Levels: What Nonprofits Need to Know
Federal wage and overtime pay obligations extend to nonprofits in some cases.
The Department of Labor (DOL) recently expanded the federal minimum salary requirement from $684 per week (or $35,568 annually) to $844 ($43,888), a threshold employers must meet to avoid paying overtime. This is a steep increase from just five years ago. Before the last expansion in 2019, the weekly minimum was $455. These changes have direct implications for the payrolls of nonprofits, ministries, and churches.
Photo via Google Street View
Minimum salary regulations stem from the 1938 Fair Labor Standards Act (FLSA), which originally mandated a $.25 hourly wage or $100 weekly salary for workers to be exempt from overtime pay. Most executive, professional, and administrative employees—so-called white-collar workers—are exempt from the FLSA if they earn a fixed salary.
The $844 jump will take effect on July 1. The DOL estimates that about 1 million employees will be impacted by the initial update. An even higher salary requirement comes next, likely to affect 3 million employees: Beginning in January 2025, employers must pay $1,128 per week ($58,656 annually). In addition to these standard levels, the DOL also raised earnings for highly compensated employees from $107,432 per year today to $132,964 starting in July and $151,164 in January.
Chart via the DOL
Flow chart of affected employees. Source: Federal Register
While churches and religious charities are often exempt from federal regulations, labor laws kick in when they engage in business activities. The FLSA covers employees working at businesses with $500,000 or more in annual sales. Charitable organizations must pay minimum salaries when they operate a commercial “enterprise” that generates revenue in exchange for goods or services, such as a ministry running a book shop. The rules don’t extend to free charitable services or non-commercial work performed by volunteers.
Even if a ministry isn’t considered an enterprise, FLSA still might apply to employees participating in interstate commerce. Conner & Winters Law previously cited the example of a church administrative assistant frequently emailing out-of-state parishioners or a church custodian ordering supplies with long-distance shipping.
According to Church Law and Tax, all churches should determine which positions are subject to the ministerial exception, which applies to clergy, pastors, ministers, and other spiritual-focused positions exempt from minimum wage and overtime rules. If not, they must act quickly to bump their weekly compensation to $844 or reclassify those employees. In the latter case, organizations might consider whether a part-time position would be appropriate, minimizing the need for overtime pay.
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