the fair labor standards act and religious organizations

News from the Center for the Study of Law and the Church, Samford Universihj, Birmingham, Alabama
Spring 1992
THE FAIR LABOR STANDARDS ACT AND
RELIGIOUS ORGANIZATIONS
T he Fair Labor Standards Act
(Act), 29 U.s.c. § 201, passed in
1938, sets general standards for
minimum wages, overtime compensation,
restricts the employment
of underage children, and
provides for equal pay for equal
work regardless of gender for
covered employees. Covered
employees include (1) employees
engaged in interstate commerce,
(2) employees engaged in the production
of goods for commerce,
and (3) employees employed in an
enterprise engaged in commerce
or in the production of goods for
commerce. Employers who fail to
follow the provisions of the Act
may be liable for substantial fines
and penalties. This article will discuss
whether churches and their
employees fall under the provisions
of the Act and any exemptions
that might apply.
The Act was initially passed to
protect employees engaged in
interstate commerce from substandard
wages and excessive
working hours. The Act accomplishes
some of its goals by prescribing
a maximum workweek of
40 hours for covered employees,
and requires the payment of overtime
at a rate of one-and-one-half
times (or time-and-a-half) of the
employee's regular rate of pay for
all hours worked in excess of 40
per week. The Act also prescribes a
minimum wage for all covered
employees. The hourly minimum
wage is the amount Congress has
determined is necessary to sustain
a minimum standard of living. The
minimum wage currently is $4.25
per hour. The Act does not establish
a daily maximum hours limit,
after which overtime would be
required. Overtime would need to
be paid over to the employee only
on the regular payday for the
workweeks in question.
In order for a worker to be entitled to
the minimum wage and overtime compensation
provisions of the Act, first he
or she must be an "employee."
The Act defines an employee as
"any individual employed by an
employer" and states that
"employ" means a person is "suffered
or permitted" to work. [d. at
203(e) & (g). Volunteers and selfemployed
persons are not considered
employees and so are not
entitled to the minimum wage or
overtime pay.
Although the Act originally
covered only those employees
"engaged in commerce or in the
production of goods for commerce"
(commerce including both
incoming and outgoing foreign
transportation of goods, as well as
such trade between the states),
Congress expanded the Act's
coverage in 1961 by amending the
Act to cover "enterprises" as well
as individual employees. The Act
now provides that employers must
pay the minimum wage and overtime
compensation not only to
employees actually engaged in
commerce or in the production
(continued 011 pg. 2)
ARE CHURCHES EXEMPT
FROM THE DISABILITIES ACT?
T he Americans with Disabilities
Act (ADA) of 1990 was passed to
establish a uniform, national program
to protect the disabled from
discrimination and to make public
structures accessible to the disabled.
42 U.s.c. § 12101. The law
prohibits discrimination against
persons with physical and mental
disabilities in public accommodations,
state and local government
services, private and public transportation,
private-sector employment,
and telecommunications services.
While churches and other
religious organizations are exempt
from most provisions of the law,
there are some significant require-
ments that do apply to churches
and religious organizations.
Public Accommodations
and Transportation
The ADA includes a list of private
entities that are considered
"public accommodations" for purposes
of the ADA and so must
conform to the law's requirements.
Places such as restaurants,libraries,
law offices, day care centers,
homeless shelters, and food banks,
among others, are considered public
accommodations for purposes
of the law. [d. at 12181(7). Public
accommodations must make their
(conHnued on pg.4)

(Fair Labor Standards Act cont'd)
of goods for commerce, but also to
any employee in "an enterprise
engaged in commerce or in the
production of goods for commerce."
Id. at 203(s). Therefore, in
order for'the minimum wage and
overtime compensation requirements
to apply to a particular
worker, the following two requirements
must be met:
(1) the worker must either be
(a) engaged directly in
commerce or in the
production of goods for
commerce,
or
(b) employed by an enterprise
engaged in commerce
or in the production
of goods for
commerce, and
(2) the worker must be an
employee.
The Act defines an 'enterprise'
as "the related activities performed
... by any person or persons for a
common business purpose." Id. at
203(r). Most religious and charitable
organizations will be excluded
from this definition of the Act so
long as they are not operating for
profit and are not pursuing a business
purpose. If, however, the
organization is engaged in commercial
or business activities, it
will be deemed to be an 'enterprise'
and subject to the minimum
wage and overtime compensation
requirements. The United States
Supreme Court noted that "[tlhe
Act reaches ... the 'ordinary commercial
activities' of religious
organizations." Tony & Susan
Alamo Foundation v. Secretary of
Labor, 471 U.S. 290, 302 (1985).
Congress, however, further
amended the Act in 1966 to
include within the definition of
'enterprise' any "preschool, elementary
or secondary school, or
an institution of higher education
(regardless of whether or not such
... institution, or school is public
or private or operated for profit or
not for profit)". 29 U.S.c. § 203(r).
Th is provision has been interpreted to
provide that schools and preschools,
even those operated by churches, are
regarded to be activities performed for a
common business purpose. Also, the
tenn 'preschool' has been defined to
include a church-operated child care
facility even if the faci lity is primarily a
custodial, rather than an educational,
institution. Department of Labor, Publication
1364.
Once a church school or preschool
is deemed to be an 'enterprise',
it must also be 'engaged in
commerce or in the production of
goods for commerce', and the
worker must be an employee. An
enterprise engaged in commerce
or in the production of goods for
commerce is defined by
the Act as an enterprise that:
(1) "has employees engaged in
commerce or in the production
of goods for commerce,
or that has
employees handling, selling,
or otherwise working
on goods or materials that
have been moved in or
produced for commerce by
any person; and is an
enterprise whose annual
gross volume of sales made
or business done is not less
than $500,000"; or
(2) is engaged in the operation
of a ... preschool, elementary
or secondary school,
or an institution of higher
education (regardless of
whether or not such ...
institution or school is
public or private or operated
for profit or not for
profit)." 29 U.s.c. §
203(s)(I).
Therefore, according to section
203(s) of the Act, church-operated
schools and preschools are
deemed to be 'enterprises engaged
in commerce or in the production
of goods for commerce'.
Only those church employees who
work in the school or preschool are
covered by the Act. Other church
members, unless they are involved in
commercial activities that gross over
$500,000 per year, will not be covered.
In Tony & Susan Alamo Foundation
v. Secretary of Labor, 471
2
U.S. 290, 302 (1985), the u.s.
Supreme Court said the Act applied
to "associates" who performed
commercial work for a religious
organization in exchange for
food and boarding. The foundation
was involved in various commercial
enterprises, such as restaurants
and construction, and the
associates who performed the
work were former drug addicts
and criminals who had been evangelized
by the foundation. The
Court, in finding that the foundation's
commercial activities were
an enterprise engaged in commerce,
said "[tlhe statute contains
no express or implied exception
for commercial activities conducted
by religious or other nonprofit
organizations, and the
agency charged with its enforcement
has consistently interpreted
the statute to reach such businesses."
Id. at 296.
The Court also said that the
foundation's "associates" were not
volunteers but employees. The
Court noted that the Act defined
wages to include in-kind benefits,
or benefits that are the equivalent
of regular wages such as food and
lodging, and so the associates were
actually compensated employees
under the Act. The justices noted
that the test of employment under
the Act is one of "economic reality"
and compensation received
primarily in the form of benefits
are wages in another form. Id. at
301. The foundation was required
to pay the "associates" the minimum
wage and overtime
compensation.
Exemptions Under the Act
Churches and other religious
organizations should be aware of
exemptions for certain workers
who are not subject to the minimum
wage and overtime compensation
requirements. First, the Act
grants a limited exemption for
employees of a religious or nonprofit
educational conference center
if the center does not operate
for more than seven months in
any calendar year, or if during the
preceding calendar year its average
receipts for any six months

(Fair Labor Standards Act cont'd)
were not more than one-third of
its average receipts for the other
six months of the year. 26 U.s.c. §
213(a)(3).
Second, the Act exempts "any
employee employed in a bona fide
executive, administrative, or professional
capacity (including any
employee employed in the capacity
of academic administrative personnel
or teacher in elementary or
secondary schools.)." Id. at
213(a)(1). The Department of Labor
has defined the various job
requirements for each of the foregoing
categories and what is
required for a person to be exempt
from the minimum wage and overtime
compensation requirements.
An employee of a church or other
religious organization who is
employed in a bona fide executive,
administrative, or professional
capacity will be exempt from the
Act's requirements.
Executive employees are defined
as any employee (1) whose primary
duty is the management of
(a) the enterprise in which he is
employed or (b) a customarily recognized
department or subdivision
of the enterprise, (2) supervises the
work of two or more full-time
employees, (3) has authority to
hire, discharge, or promote other
employees, (4) exercises discretionary
powers, (5) spends at least 80
percent of the workday engaged in
the primary duty, and (6) is paid
on a salary basis of not less than
$130 per week. 29 C.F.R. § 541.101.
Administrative employees are
defined as any employee (1) who
performs office or non manual
work directly related to management
operations, or administrative
duties in a school system, (2) regularly
exercises discretion beyond
clerical duties, (3) performs specialized
or technical work, or special
assignments with only general
supervision, (4) spends at least 80
percent of work time on such
work, and (5) is paid on a salary
basis of not less than $130 per
week. 29 C.F.R. § 541.201.
Professional employees are
defined as any employee (1) who
is required to have as his primary
duty, work that either (a) requires
advanced knowledge in a field of
science or learning, of a type customarily
acquired by a prolonged
course of specialized study, (b)
work that is original and creative
in character in a recognized field of
artistic endeavor, and is primarily
based on the employee's invention,
imagination, or talent, or (c)
teaching, tutoring, instructing, or
lecturing as a teacher in a school
system, (2) who exercises discretion
and judgment, (3) whose work
is predominantly intellectual and
varied in character, (4) devotes 80
percent or more of his hours to the
activities previously mentioned,
and (5) is paid on a salary or fee
basis of not less than $150 per
week (this requirement does not
apply to teachers). 29 C.F.R. §
541.301.
Clergy are included in the list of profes
sional employees. [d. at 541.301.
The Department of Labor has
also issued Publication 1364 which
states the following:
While preschools engage in
some educational activities for
the children, employees whose
primary duty is to care for the
physical needs of the children
would not ordinarily meet the
requirements for exemption as
teachers. This is true even
though the term "kindergarten"
may be applied to the ordinary
day care center. However, bona
fide teachers in a kindergarten
which is part of an elementary
school system are still con sid -
ered exempt under the same
conditions as a teacher in an elementary
school.
Therefore, if a church operates a
school, the teachers would be
exempt from the Act while other
school employees, such as custodians
and cafeteria workers, would
be subject to the Act's minimum
wage and overtime compensations
provisions.
Constitutionality of Act As
Applied to Churches
In Dole v. Shenandoah Baptist
Church, 899 F.2d 1389 (4th Cir.
1990) cert denied 111 S.C!. 131
3
(1990), the court held the Fair
Labor Standards Act applied to
church-operated schools and
employees. Shenandoah Baptist
Church is an independent Baptist
church which believes in the absolut.e
authority of the Bible. Shenandoah
opened Roanoke Valley
school offering traditional academic
subjects into which biblical
material had been integrated and
eventually offered classes from
kindergarten through high school.
Roanoke Valley school teachers
received a low base salary. Because
the low salary level made it difficult
to attract teachers, the school
instituted a head-of-household
salary supplement. The church
interpreted the Bible to teach that
the husband is the head of household.
Married male teachers
received the salary supplement
while married women were not
eligible to receive the supplement,
even though they were the sole
working parent and had dependents.
Roanoke Valley also had support
personnel, such as custodians
and lunchroom workers, who were
paid less than the hourly minimum
wage.
The court had to decide (1)
whether a church-operated school
is an "enterprise" for purposes of
the Act, (2) whether individuals
who work in such a school are
'employees' under the Act, and (3)
whether the First Amendment precluded
Act coverage of such a
school. The court held the Act did
apply to the school. The court
looked at both the Act's definition
of "enterprise" and the legislative
history of the Act and concluded
that church-operated schools are
encompassed within the Act's definition
of an enterprise.
The court also rejected the
church's claim that the individuals
who worked for the school fell
under the Act's exemption for
ministerial employees. The court
noted that the teachers performed
no "sacerdotal" function, did not
serve as church governors, and did
not belong to any clearly delineated
religious orders.
The judges also noted that the
Supreme Court had explained that the

(Fair Labor Standards Act conl'd)
test of employment under the Act was one
of "economic reality" alld that the eco-
1I0mic reality in the present case was that
the Roanoke Valley teachers were
employed as lay teachers ill a churchoperated
private school.
Finally, the court held that the Act
did not impermissibly burden the
church members' exercise of religion
under the First Amendment. Church
members testified that the Bible
does not mandate a pay differential
based on sex and that no church
doctrine prevented the school from
paying women as much as men or
from paying the minimum wage.
The court concluded that there
could be no way to exempt the
school without exempting all other
sectarian schools and employees
from the Act. This would undermine
the congressional goal of making
minimum wage and equal pay
(Disabilities Act .. . can I'd from pg. 1)
buildings and other structures
accessible to the disabled. This could
include such things as removing
obstacles to doorways, pathways,
rest rooms, water fountains and conference
rooms, widening hallways
and erecting ramps for wheelchairs,
and installing flashing alarm lights.
Churches, however, are exempt
from having to make their public
facilities physically accessible to the
disabled. Section 12187 of the ADA
states that religious organizations or
entities controlled by a religious
organization, including places of
worship, are exempt from the ADA's
public accommodations definition.
According to federal regulations, the
ADA's exemption of religious organizations
and religious entities controlled
by religious organizations is
very broad, encompassing a wide
variety of situations.
Religious organizations and entities
controlled by religious organizations
have no obligations under the
ADA. Even when a religious organization
carries out activities that
would otherwise make it a public
accommodation, the religious organization
is exempt from the ADA coverage.
Thus, if a church itself operated
a day care center, a nursing
home, a private school, or a diocesan
school system, the operations of
requirements applicable to all
schools and a less restrictive means
was not available to attain Congress's
goal to insure workers a minimum
wage sufficient to maintain a
minimum standard of living.
The church was required to pay
approximately $178,000 in back pay
to female teachers who were subject
to equal pay violations and about
$17,000 to support staff members
who were subject to minimum wage
violations. This case demonstrates
the importance of following the
wage and hour requirements when
applicable.
Compliance and Penalties
All employers who have
employees covered by the Act must
maintain adequate records documenting
all employees, hours
worked, the wages received, and
such center, home, school, or
schools would not be subject to the
requirements of the ADA. Also, the
religious entity would not lose its
exemption merely because the services
provided were open to the
general public. The test is whether
the church or other religious organization
operated the public accommodation,
not which individuals
receive the public accommodation's
services. 56 Fed. Reg. 35,544 (1991).
Religious entities that are controlled
by religious organizations are
also exempt from the ADA's requirements.
Many religious organizations
use lay boards and other secular or
corporate mechanisms to operate
schools and an array of social services.
The use of a lay board or other
mechanism does not itself remove
the ADA's religious exemption.
Thus, a parochial school, having religious
doctrine in its curriculum and
sponsored by a religious order,
could be exempt either as a religious
organization or as an entity controlled
by a religious organization,
even if it has a lay board. The test
remains a factual one - whether the
church or other religious organization
controls the operations of the
school or of the service or whether
the school or service is itself a religious
organization. Id.
4
other terms and conditions of
employment.
Also, penalties may be imposed for violations
of the Act.
Employers who violate the Act are
liable to their employees for the
amount of the unpaid minimum
wage or the unpaid overtime pay
and an equal additional amount for
liquidated damages. Employees can
also collect the reasonable cost of
their attorney's fees and court costs
in suing the employer. Employers
who willfully violate the minimum
wage or overtime pay requirements
of the Act are subject to a fine of up
to $10,000 for each violation. A 2year
statute of limitations applies to
the recovery of back wages except in
the case of willful violations, in
which case a 3-year statute of limitations
applies. 26 U.S.c. § 216. n
Although a religious organization or a
religious entihj that is controlled by a religious
orgallizatioll has no obligations
under the rule, a "pulllic accommodation"
that is Ilot itself a religious organization
but that operates a place of public accommodation
in leased space on the property
of a religious entity, which is not a place
of worship, will be subject to the rule's
requirements if it is not under the control
of the religious orgallization.
For example, if a church rents
meeting space, which is not a place
of worship, to a local community
group or to a private, independent
day care center, the ADA applies to
the activities of the local community
group and the day care center if a
lease exists and consideration is
paid. Id.
The Department of Transportation
has also stipulated in its regulations
that the transportation provisions of
the ADA do not apply to religious
organizations. Church buses and
shuttle services will not have to
comply with the public transportation
provisions of the ADA, such as
providing wheelchair lifts in church
vehicles. 56 Fed. Reg. 45,584 (1991).
Employment Requirements
Larger churches, however, will
come under the employment section

Crowley v. Tilton, and Word of
Faith World Outreach Center
Church, No. 92C-169E (D.Okl. filed
Feb. 1992).
B everly Crowley has sued televangelist
Robert Tilton and his
Word of Faith World Outreach
Center Church, contending fraud
and deceit. Five months after Mrs.
Crowley's husband died of kidney
failure, she was still receiving mail
from the televangelist addressed to
her deceased husband; one of the
(Disabilities Act ... cont'd)
of the ADA, which prohibits discrimination
in hiring on the basis
of a disability. The law still recognizes,
however, the right of
churches and other religious
organizations to choose employment
candidates that subscribe to
the same faith as the organization.
The law states a religious corporation,
association, educational institution,
or society is permitted to
give preference in employment to
individuals of a particular religion
to perform work connected with
the carrying on by that corporation,
association, educational institution,
or society of its activities. A
religiOUS entity may require that
all applicants and employees conform
to the religious tenets of such
organization. U.S.c. § 12113(c).
However, a religious entity may
not discriminate against a qualified
individual, who satisfies the permitted
religiOUS criteria, because of
his or her disability. 56 Fed. Reg.
35,726 (1991).
Headnotes
letters from Tilton said, "God
spoke to me this morning specifically
about you, Tom, and He's
going to heal you." Mrs. Crowley
asserted that the solicitations to
her deceased husband stated that
God wanted to restore Crowley'S
health and that all this would
occur if money was sent to Tilton.
Mr. Crowley died in September
1991. In January 1992, Mrs. Crowley
wrote Tilton a letter informing
him of her husband's death and
asking him to stop sending
A church that is not required to
become physically accessible to the public
may still need to make structural
changes in order to become accessible to
employees with disabilities.
Beginning in July 1992, churches
and other religious organizations
will be required to make reasonable
accommodations for all disabled
employees if they have 25 or
more workers for 20 or more
weeks a year between July 29, 1992
and July 29, 1994. Beginning in
1994, religious groups will have to
comply with accommodation
requirements if they employ 15 or
more persons for 20 or more weeks
a year. 56 Fed. Reg. 35,726. The
Equal Employment Opportunity
Commission (EEOC) will be
responsible for enforcing the
employment provisions of the
ADA.
Although most provisions of the
ADA do not apply to churches and
other religious organizations, these
requests for donations to his ministry.
The solicitation letters, however,
continued. Mrs. Crowley said
she has sued Tilton because she
cannot make the solicitations stop.
Mrs. Crowley is asking for $40 million
in damages. She alleges that
Tilton's letters addressed to her
late husband have caused her to
suffer anguish, shock, nervousness
and anxiety. II
groups could be more aware and
sensitive to the needs of those
with handicaps. Some church leaders
are prone to say their churches
do not have any handicapped
members in their congregations, so
they do not have any problems
with accessibility. What they may
be blind to is that the accessibility
problem may be the very reason
they do not have disabled people
in their churches. The ADA
requirements could serve as useful
guidelines for churches and other
exempt organizations on how to
make their facilities more accessible
to the disabled. Churches
should evaluate the intent of the
legislation in terms of the church's
witnessing.
Because the ADA legislation is
new and has not been interpreted
by any court, churches should
keep current on the ADA for any
possible new interpretations of the
Act that may have an impact on
churches. n
The next issue of LAW & CHURCH (Summer 1992)
will have an article dealing with the illness of
AIDS in the content of the church.
5

LAW &CHURCH
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CENTER FOR THE STUDY OF LAW & THE CHURCH, SAMFORD UNIVERSITY
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