Nov. 21, 2024 Update

A federal court recently struck down a new federal regulation that increases the salary threshold for overtime exemptions, which could have affected ministry employers and employees alike. The United Methodist Church’s General Council on Finance and Administration looks at what that means for churches and other denominational employers. The finance agency is hosting a Dec. 3 webinar that will discuss these developments.
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WHAT IS CHANGING?

The U.S. Department of Labor released a new rule regarding overtime wage payments in the U.S. that increases the salary threshold for exempt employees in two phases.

JULY 1, 2024
From $35,568 to $43,888 annually

JANUARY 1, 2025
The salary level is expected to increase to $58,656

WHAT DOES THIS CHANGE MEAN?

The adjustment in salary thresholds means employees earning less than the new thresholds would no longer qualify for the overtime exemption and therefore become eligible for overtime pay.

Employers are to provide overtime pay to employees at one and one-half times an employee’s regular pay for every hour the employee works beyond 40 hours in a workweek, unless the employee falls within an exemption.

REQUIRED CRITERIA FOR EXEMPTION

Employees MUST meet the Job Duties Test! Each category of exemptions has its own criteria relating to the primary job duties the employee performs.

AND

Currently employees MUST be paid on a salary or fee basis at no less than $684 per week ($35,568 annually).

FAIR LABOR STANDARDS ACT EXEMPTIONS

Employees are exempt from the FLSA minimum wage and overtime protections if they are employed in a bona fide executive, administration, or professional EAP capacity, as those terms are defined in the Department’s regulations here.

WHO DOES THIS CHANGE IMPACT?

Any employee paid on a salary basis.
Clergy serving in a ministerial role may be exempt from this requirement under the ministerial exception.

WHAT HAPPENS NOW?

Identify affected employees and assess how to handle changes to employee statuses such as:

• Payroll adjustments

• Redefining job descriptions

• Modifying work hours to manage labor cost

Reclassify employees whose duties might not meet the requirements to be exempt

Plan for how to roll out reclassification decisions

• Train reclassified employees on timekeeping requirements

Budget for increases in salary and overtime expenses

Decide, given the interim and 2025 salary thresholds, if you will make the changes in two steps or jump to the 2025 threshold

HOW TO COMPLY?

Employers have a range of options for responding to the updated thresholds established in this rule.

Some examples include:

• Increase the salary of the employee to at least the new salary level to retain their exempt status

• Pay an overtime premium of one and a half times the employee’s regular rate of pay for any overtime hours worked

• Reduce or eliminate overtime hours

• Consider nondiscretionary bonuses up to 10% of the salary threshold

• Reduce the amount of pay allocated to the employee’s base salary (provided that the employee still earns at least the applicable hourly minimum wage) to offset new overtime pay

• Convert a position to hourly wages (tracking hours and providing meal/rest breaks would be required)