Due to a court ruling which occurred after the most recent Misson Matter$ was sent, please review the below updated information on overtime pay rules.
By Jean Tomasco, ECCT’s Director for Human Resources
December 2024
A federal district court in Texas recently voided key new overtime pay rules set by the U.S. Department of Labor (U.S. DOL) earlier in 2024, relieving private employers—including churches—from paying potentially more in compensation costs.
Under the U.S. DOL rule, the minimum salary for exempt employees was set to increase on January 1, 2025, to $1,125 per week (equating to an annual salary of $58,656), having already increased under the rule from $684 per week to $844 per week on July 1, 2024. In addition, the rule included an automatic indexing factor that would further increase the salary basis every three years.
The plaintiffs in the Texas case challenged this new rule, claiming that it exceeded the authority that Congress had granted to the U.S. DOL and seeking nationwide relief. On November 15, 2024, the Texas federal court agreed, ruling that the U.S. DOL exceeded its statutory authority by raising the salary level too high and including the auto-increase mechanism to the rule. The Court rejected the 2024 rule in its entirety—meaning not only the January 2025 increase, but also the increase that took effect in July 2024.
At present, this decision means that churches need only comply with the U.S. DOL’s pre-July 2024 minimum salary threshold of $684 per week, or $35,568 per year, or with state law if higher. However, lawsuits regarding the 2024 final rule are currently pending in two other federal district courts, and the U.S. DOL has filed a notice of appeal from the Texas court’s November 15th decision. Whether the new administration may decide not to pursue this appeal or the appellate court may uphold the decision, or whether courts in the other cases issue conflicting opinions, remains to be seen. It is also possible that Connecticut could raise its salary-basis threshold—currently at $475 per week—in the future.
Classification of employees as exempt versus non-exempt can be confusing. In general, federal regulations implementing the executive, administrative and professional (EAP) exemption—which regulations are unaffected by the recent court ruling—require that each of three tests must be met in order for an employee to be exempt:
- the employee must be paid a predetermined, fixed salary that is not subject to reduction based on the quality or quantity of work performed (the salary basis test).
- the amount of salary paid must meet a minimum specified amount (the salary level test).
- the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by regulation (the duties test). Connecticut law includes similar, though not identical, exemptions. In general, the law that is more favorable to employees on any particular aspect is the one that applies.
With few exceptions, employees paid on an hourly basis are non-exempt since they do not meet the salary basis test. However, simply paying an employee on a salary basis does not automatically make them exempt. They still must meet the salary level test and the duties test. Further, job titles and job descriptions do not determine EAP exemption status; it depends on the employee’s actual job duties.
Even though the new U.S. DOL rule—which affected the minimum salary basis amount—has been halted by the recent court decision, employers may err in classifying employees as exempt when in fact they do not meet the duties test. It therefore may be a good time for parishes to review their non-clergy exempt positions to determine whether they meet all of the tests and truly qualify for exempt status. For general information on overtime and the federal EAP exemptions, visit the website of the Wage & Hour Division of the U.S. DOL. Information on the state laws and exemptions is available on the CT Wage & Workplace Standards website.
DISCLAIMER:
This material is for informational purposes only and not for the purpose of providing legal advice. You should always contact your attorney to determine if this information, and your interpretation of it, is appropriate to your particular situation.