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Patrick, Esq.
Patrick, Esq., Lawyer
Category: California Employment Law
Satisfied Customers: 6955
Experience:  Significant experience in all areas of employment law.
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Working on employment policies for handbook at small church

Customer Question

Working on employment policies for handbook at small church in California. We have employees who work 15 - 20 hrs per week in an Exempt fashion, that is, without direct supervision, according to their own ministry plan, submitting their own budget and managing it, exercising independent decision making 90% of the time, working independently of their direct supervisor at least 75%. Because they are so part time they do not earn the wage requirement of $455 per week to me all of the qualifications for Exempt status. The nature of church ministry is that, from time to time, the work of the church requires additional hours to accomplish. This then means these part-time employees are asked to work more than their 15-20 hours per week. They are paid a monthly salary based on the number of hours the position general requires to execute the job function not an hourly rate. But, if it takes more than their 15-20 hours per week from time to time to, for example take kids on an overnight retreat, we would regularly give them extra time off the following week versus paying them for additional hours. We don't know if this is legal. Our goals is to have something that works like part-time Exempt, in that the employees are getting paid for the responsibility they have and the results they produce NOT the amount of time they put in. We do not want to be abusive, either. We never ask that part-time people regularly exceed their hours. So this is a little more than a small question. Help?
Submitted: 1 year ago.
Category: California Employment Law
Expert:  Patrick, Esq. replied 1 year ago.

Good afternoon and thank you for entrusting me to answer your question. I will do everything I can to assist you.

Unfortunately, the compensation structure you describe poses a number of serious legal problems and would not be advisable to implement.

First of all, although you state that these employees perform their work in an "exempt fashion," I am unclear specifically what overtime exemption you are applying. Exemptions from overtime fall into certain highly specific categories and require more than simply demonstrating that the employee exercises independent discretion.

There is an exemption for certain managerial employees, administrative employees who are responsible for running and managing the business as a whole, and professional employees such as doctors and lawyers and other certified professionals, all of which require the exercise of independent judgment as one criteria for the exemption but none of which are fully satisfied by satisfaction of that criteria alone. See here for a more thorough list of exemptions, but the three I named above are the most commonly applied and the most likely to apply under your circumstances: http://www.dir.ca.gov/dlse/faq_overtimeexemptions.htm

In addition to there being a problem with whether the positions themselves are eligible for exemptions, there is also a problem with paying an employee on a salary-exempt basis when their salary is subject to fluctuation on the basis of the numnber of hours worked. Ironically, paying your employees MORE for additional work they perform likely compromises the exemption, even though your intentions here are good, because salary exempt employees must be paid the same amount every pay period "regardless of the quality or quantity of the work performed." This is the essence of being a salaried employee.

When an employee's pay starts fluctuating based on the amount of work they perform, the Labor Board will typically void the exemption on the ground that the employee is not being treated as a salary employee but as an hourly employee, since their pay has become a function of the total number of hours they actually work and their pay is no longer "predetermined."

Finally, this brings me to the minimum salary requirement of twice the minimum wage that all salaried employees must be paid in order to be eligible for the exemption. While you are correct that the federal weekly minimum is $455, the weekly minimum in California is higher than that because California has a higher minimum wage--$8.00/hr. Twice the minimum wage for a 40 hour week is $640 per week in California, which is the minimum that any salaried employee must be paid in order to be exempt from overtime and minimum wage.

Although I wish I could tell you otherwise, this cannot be paired down to take into account that an employee is only part time--it is a strict requirement not subject to exception. While it is technically legal to have a salary exempt employee who works only part time hours, all salaried employees must be paid a minimum of $640 per week, regardless of whether they are only working 10 hours or are full time. The Department of Labor recently issued an opinion letter to this effect.

So, for all these reasons, the salary structure you are proposing will likely eventually land you into some legal trouble and is therefore not advisable to continue.

Although you want to avoid hourly pay, that is STRONGLY recommended under the circumstances. Any other pay structure becomes unduly complicated and potentially runs afoul of state and federal labor law due to the part time nature of the work. Even though your workers are independent, you can force them to submit weekly time sheets and tell them approximately how many hours they are expected to work.

Alternatively, at least in theory, it would be possible to pay your employees a flat rate for the first 20 hours of their work--the part time schedule--provided that such rate, when divided by 20, equals or exceeds the minimum wage. There is no law against flat rate pay of this kind. However, you would still be liable to pay the employees for all additional hours worked at your agreed upon hourly rate should they work beyond their 20.

Again, a compensation structure such as what you describe (paying salary adjusted for part time) would definitely not be a good idea. By far, the best compensation structure would be hourly; however, it is also permissible to pay employees a flat rate for their part time work, provided that flat rate equals or exceeds minimum wage divided by the number of hoursit is intended to compensate, and provided that you pay an hourly rate for all hours exceeding the base number for which the flat rate compensates.

Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, please be so kind as to provide a positive rating of my service so that I may receive credit for assisting you.

Very best wishes to you and thank you so much for coming to Just Answer.

Expert:  Patrick, Esq. replied 1 year ago.

Kimberly,

JustAnswer.com apparently just experienced a technical issue that caused the site to go down. I am not sure if you have had a chance to view my answer, but seeing as you have not responded nor concluded our dialogue by rating the service I have provided (necessary for me to receive credit), I wanted to touch base with you.

Did you have any followup questions for me?

Customer: replied 1 year ago.

Okay, that clears up so much for me. Based on what you've told me, none of the part-time people are Exempt employees because of the wage law. That settles that. Let me try another scenario. Can we write a job description that includes a flat monthly salary for work done but does not stipulate how many hours are required? Can we say "part-time equals anything under 30 hours per week"? Or, how about this, in most of the cases here our part-time ministry folks are employed, in part, to become trained to become licensed, ordained clergy. Could we pay them as interns, with a stipend? We don't want to abuse anyone we just started developing major morale problems when two months ago we asked our employees to start keeping time records. They knew when they were hired that from time to time they would be asked to work more hours in a week to "accomplish the work of the church" (which I also do not know is legal). They "signed on for that". In one case they were asked to work their 15-20 hours and then, for example, take some kids on retreat for the weekend. This exceeded their hours and they started asking questions. The nature of ministry work is that generally you serve to get the work done. It is not about how many hours you work or what you make (within reason of course). We will not ask an part-time person to work more hours regularly but instead would look at the job design and skills of the employee to see if we are asking to much. Please let me know your thoughts. Thanks.

Expert:  Patrick, Esq. replied 1 year ago.

Kimberly,

Thank you very much for your reply. You raise a couple of separate points, so please allow me to address each one as follows:

Can we write a job description that includes a flat monthly salary for work done but does not stipulate how many hours are required? Can we say "part-time equals anything under 30 hours per week"?

Provided that the flat rate, when divided by the total number of hours actually worked, does not fall below minimum wage, this is permissible. This is actually the compensation structure I proposed as an alternative to straight hourly above.

There are two problems with implementing this pay structure, though. First is that employees paid on a flat rate basis are still always going to be required to keep track of their hours. If employees don't keep track of their hours, you have no way of knowing whether you are complying with minimum wage and overtime requirements. The law also specifically requires employer to maintain these records for all non-exempt employees.

Since you would be implementing a flat pay system to streamline things for your employees (whom you indicate above had morale problems when you asked them to keep records), this would simply not solve that problem.

The other issue with flat pay is that, in any pay period where the employee worked less than the flat pay was intended to compensate them for, you as the employer will be losing money by paying employees for hours that they did not actually work. So, you don't get the benefit of a salary structure (not having to worry about the number of hours worked) but you do get to enjoy the drawback, which is that sometimes you pay employees for time they spend not actually working.

Or, how about this, in most of the cases here our part-time ministry folks are employed, in part, to become trained to become licensed, ordained clergy. Could we pay them as interns, with a stipend?

In order to properly be classified as an "intern," a worker must satisfy the following criteria:

1. The training, even though it includes actual operation of the employer’s facilities, is similar to that which would be given in a vocational school.

2. The training is for the benefit of the trainees or students.

3. The trainees do not displace regular employees, but work under their close observation.

4. The employer derives no immediate advantage from the activities of the trainees or students, and, on occasion, the employer’s operations actually may be impeded.

5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period.

6. The employer and the trainees or students understand that the latter are not entitled to wages for the time spent in training.

You are in a better position than me to say whether the part-time ministry employees you have satisfy these criteria. I'd say, just based on the limited facts you have described, that they do not. Furthermore, I think that their reclassification from paid employee to intern would draw tremendous scrutiny from the Labor Board. In total, I don't think this is a wise move and if I were your attorney, wich I am not (I can only provide information about the law with which you can choose to do as you please), I would strongly advise you against it.

Again, I know this is not what you want to hear, but hourly pay really is in both your best interest and the best interest of your employees. The other pay structures you have described are either risky, cost-inefficient, or simply impermissible under the law.

I do hope that you appreciate my candor in this regard. As always, feel free to let me know if I can provide any further clarification. Best wishes to you and your congregation.

Expert:  Patrick, Esq. replied 1 year ago.
Kimberly,

Here is some more information with regard to the criteria for "interns": http://www.dol.gov/whd/regs/compliance/whdfs71.htm

Again, please feel free to let me know if you have any further concerns. If I have answered your question, I would be very grateful for a positive rating of my service so that I may receive credit for assisting you.

Kindest regards.
Customer: replied 1 year ago.

Thank you so much for providing the information on "intern" criteria. This was a resource I was not expecting and did not ask for. That is meaningful to me and will consider that as I rate your service.


 


So, I have now read several church employment manuals and it looks to me like ALL of them pay their part-time people hourly. The part-time people cannot work over-time without written consent from their supervisor and I suppose that is one way to control when or if we want someone to work additional hours at anytime. Then, any hours they work in addition to their 10-15 hrs per week are paid at the regular hourly rate until any additional time work exceeds 40 hours per week. This is not likely to happen.


 


So, here is what I think might work for us. Assuming no non-exempt employee works more than 40 hours per week, can we implement a flexible schedule that would allow our hourly people to work the equivalent of their hours per week over the course of a month. For instance one week they may work 5 hours, the next 25 hours, the following 10...,etc, so long as in the month they do not exceed the hours they are supposed to work and they do not exceed 40 hours per week. Can we do this?


 


It seems to me that if we switched to a monthly pay schedule, and a flexible work schedule non-exempt employees could count up the hours they worked during the month. If it is exactly equivalent to the number of hours per week they are suppose to work in that month we would not have to pay them for any additional hours. If they did work more hours (and we would require that their supervisor gives them permission, their monthly pay could be adjusted to reflect the increase). The same could be true in reverse if they did not work all of their weekly equivalent hours during the month their pay could be adjusted down . Does this make sense?


 


It is true that legally all non-exempt employees must record their hours in all circumstances and that those records must be kept by the personnel department. Right?


 


So long as the above scenario is legal I think it makes the most sense for our church. The nature of ministry work is that sometimes it is very busy and other times it is not as busy. The flexibility to work more and then fewer hours so long as they don't exceed the hours they are required to work and/or 40 hours per week might make the most sense to us.


 


Will you please respond to my scenario here and let me know if it would work, legally? If not can you suggest something? And, will you verify for me that all non-exempt employees must record their time worked in every circumstance no matter the type of organization?


 


I think this can be our last round of communication and I will l give you a very favorable rating. You have been great!


 


Look forward to hearing from you.

Expert:  Patrick, Esq. replied 1 year ago.
Kimberly,

Thank you very much for your reply. I am very glad that you've found our discussion helpful. Please allow me to address your concerns as follows:

Assuming no non-exempt employee works more than 40 hours per week, can we implement a flexible schedule that would allow our hourly people to work the equivalent of their hours per week over the course of a month. For instance one week they may work 5 hours, the next 25 hours, the following 10...,etc, so long as in the month they do not exceed the hours they are supposed to work and they do not exceed 40 hours per week. Can we do this?

Yes, it is entirely permissible to implement a flexible work schedule where work is performed on an "as needed" basis and the work from one week is intended to equalize the next week's, shooting for a monthly target number.

There are, however, two limitations which you must consider. The first is that overtime must be paid not only for all hours in excess of 40 per week, but also for all hours worked in excess of 8 in a single day. So, even if you have a part time employee who only works 20 hours in a week, if they did that in two ten-hour days, they'd be entitled to four hours of overtime. So, when scheduling your employees, you will certainly want to keep this in mind.

Second is that, while there is nothing illegal about shooting for a target monthly total of hours worked, Labor Code 204 generally requires that employers be paid twice a month. So, you probably wouldn't be able to wait until the end of the month to make payment. See here for the text of Labor Code 204: http://law.onecle.com/california/labor/204.html

It seems to me that if we switched to a monthly pay schedule, and a flexible work schedule non-exempt employees could count up the hours they worked during the month. If it is exactly equivalent to the number of hours per week they are suppose to work in that month we would not have to pay them for any additional hours. If they did work more hours (and we would require that their supervisor gives them permission, their monthly pay could be adjusted to reflect the increase). The same could be true in reverse if they did not work all of their weekly equivalent hours during the month their pay could be adjusted down . Does this make sense?

You don't want to pay the employees in advance of them performing their work. If you do, that creates conceivable legal problems when you need to adjust their pay downward and essentially take money back from them. This problem is easily avoided simply by paying them only for the hours the actually submit after the hours are submited. Other than this, your plan seems fine.

It is true that legally all non-exempt employees must record their hours in all circumstances and that those records must be kept by the personnel department. Right?

Employers must retain records of all hours their employees work, which in turn requires the employees to log their hours. Furthermore, when you pay your employees, their paystubs must break down the number of hours they worked and the hourly rate at which they were paid. See here for more information about what information needs to be included on paystubs: http://law.onecle.com/california/labor/226.html

Will you please respond to my scenario here and let me know if it would work, legally? If not can you suggest something? And, will you verify for me that all non-exempt employees must record their time worked in every circumstance no matter the type of organization?

Straight hourly pay is your best bet, not paying employees in advance of work performed, or in anticipation of them working a certain amount, but following their submission of a timesheet compensating for all hours actually worked. Records regarding hours worked must be maintained, but they need not be automatically forwarded to the Labor Board.

Again, I sincerely XXXXX XXXXX information helps and I wish you the best moving forward.
Patrick, Esq., Lawyer
Satisfied Customers: 6955
Experience: Significant experience in all areas of employment law.
Patrick, Esq. and other California Employment Law Specialists are ready to help you
Customer: replied 1 year ago.

Thanks so much for all your help. I will rate your service now.

Expert:  Patrick, Esq. replied 1 year ago.
You are very welcome and thank you for the rating. Have a great weekend and please do not hesitate to contact me in the future with new questions.

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