Complying with New Minimum Wage and Salary Requirements

Churches, Employment, Exemptions, HR, Ministerial Exception, Nonprofit, Payroll, Wage and Hour by
Pay increases are going into effect on a federal and state level at the end of the year.  Your church or nonprofit organization may be thinking:  How do these new wage laws impact how we pay our employees and how do we ensure our payroll practices are in compliance?


First, let’s address the federal law.  The Department of Labor (DOL) recently announced an update in overtime regulations, which go into effect on December 1, 2016.  Here is what is changing:


  • Employees that qualify for the “white-collar” exemptions from overtime under the Fair Labor Standards Act (FLSA) (executive, administrative, and professional employees) must be paid a salary of $47,476 annually for a full-year worker ($913 per week). This increase sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region (currently the South).  This is a significant increase from the previous annual salary threshold of $23,660 ($455 per week).
  • Beginning January 1, 2020, and every three years thereafter, the salary threshold will automatically update based on the wage growth over time.
  • Employees exempt from overtime under the highly compensated employee exemption must be paid at least $134,004 per year.
The new DOL regulations do not address salary requirements for ministers or clergy. If a church plans to rely on a “ministerial exception” to overtime laws and thus chooses not comply with the new salary requirements, it should consult with a local attorney.


Now, let’s address California law.  Although California employers were required on January 1, 2016 to comply with a minimum wage increase to $10 per hour, the minimum wage law has been updated yet again to eventually reach $15 per hour by 2022. Employers with more than 25 employees must begin paying their employees at least $10.50 per hour on January 1, 2017.  The minimum wage will be raised to $11 per hour the following year, and then increase by $1 every subsequent year until reaching $15 per hour in 2022. Employers with 25 or less employees will not be required to begin the scheduled minimum wage increases until 2018 and will have until 2023 to reach the $15 per hour rate.


The state minimum wage increase may also significantly affect your salaried exempt workers. Employees meeting the white-collar exemptions under California law must be paid at least double minimum wage. Thus, on January 1, 2017, said exempt employees must be paid a salary of at least $3,640 per month (or $43,680 annually). In addition, your organization should ensure it complies with any city or county ordinance requiring a minimum wage, such as Los Angeles, Pasadena, or San Diego.


Failure to follow the law in this area can be expensive.  Failure to pay exempt employees the minimum salary may result in overtime pay, and failure to pay employees minimum wage could subject you to liability for unpaid wages, attorney’s fees, liquidated damages, penalties, and interest.  Due to the complexity and ever-changing nature of this area of law, and the significant liability that may result for failure to comply, you should make sure to check your payroll policies at least annually, and consult with a local attorney to ensure compliance.


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