Unless you are living under a rock, you are probably aware of the uproar in Indiana about the Religious Freedom Restoration Act that the state passed, triggering an incredible backlash inside and outside the state and a rush by legislators to revise the newly-enacted law. When even NASCAR is criticizing legislation instead of talking about its current season, you know that you have a serious problem. For those of you looking for a more balanced, statutory analysis of the issues underlying the RFRA debate, I would recommend that you start here and here.
Among the questions this week from clients about what their employees might face (if anything) when they come to Indiana, I have even fielded a couple of hypothetical questions about the IRFRA, including whether it could apply to wage and hour laws at the state or federal levels. While a little bit nuanced when it comes to ministers/clergy and objectors to Social Security and Medicare, the answer is generally “no.”
First, there are no blanket religious, church, or related exemptions from the FLSA, and I am unaware of any at the state level, either. Whether or not your business or religious entity falls under FLSA depends on the facts and circumstances of each case. As we discussed last year, the FLSA provides two different ways for coverage to apply: “enterprise coverage” and “individual coverage.” Put simply, for most businesses, the FLSA’s enterprise coverage provisions will apply if the business meets two tests. First, the business must be involved in interstate commerce. Second, the business’s gross annual revenue must be at least $500,000. If a business meets both tests, then all employees working for the business are covered, regardless of whether they ever engage in interstate commerce. Notwithstanding these limits, the FLSA may still apply individual coverage to any employee whose work affects interstate commerce.
Why RFRA Would Fail as an FLSA Defense
Under most RFRAs, you could use the Act to assert a “religion” defense to just about any conduct, provided that your objection is somehow tied to a religious practice. Indiana, Texas, and a few other states extend objector status to at least some types of businesses. However, just because you can assert an RFRA defense to wage and hour laws by claiming that Biblical parables require you to pay employees a flat daily rate and give you the right to do what you want with your money does not mean that you will be successful in defending against such a claim!
If you assert an RFRA defense to your non-payment of minimum wages or overtime, even in states that allow you to assert RFRA defenses as a business, you could expect the court to shoot down your defense rather quickly. For your defense to succeed, you would need to show that the government has no “compelling interest” in the challenged law. Typically speaking, laws like the FLSA that establish protections for workers from exploitation will reflect a valid and compelling government interest.
Special Exemptions for Religious Objectors to Social Security, Medicare
Notwithstanding the general rule above, religious exemptions to some withholding requirements do exist for certain religious groups, such as some Amish sects, that do not believe in commercial insurance. As part of its enactment of Medicare in 1965, and in response to Amish and other sects that had conscientiously objected to this government-mandated insurance, Congress exempted those groups from paying Social Security and Medicare taxes, provided the sect had been in existence since December 31, 1950. Notably, this potential exception only applies to Social Security and Medicare—these sects’ members must still pay the same income, property, sales, and other taxes as everyone else.
To claim an exemption from these withholdings and taxes, an individual must obtain a Social Security number and file IRS Form 4029. This Form requires applicants with a religious objection to waive any rights to Social Security and Medicare benefits, in addition to swearing to their conscientious objection to the programs. SSA must undertake at least a cursory religious inquiry to confirm the sect’s teachings, that it provides care for its dependent members, and that the sect has existed since 1950. Even then, an exemption from Social Security and Medicare taxes is applicable for self-employment income and wages, but not for wages paid to an employee. For employee wages to be exempt from all Social Security and Medicare withholdings, both the employee and the employer must have approved Form 4029 exemptions. Thus, wages paid to an Amish employee by an employer that is not a member of the sect would be subject to Social Security and Medicare withholdings, notwithstanding any Form 4029 exemption that the employee might hold for his or her self-employment income. Of course, even if both you and your employee hold Form 4029 exemptions, you still must pay the applicable minimum wage and overtime under the FLSA.
As I mentioned above, the one possible exception to all of this is the judicially created FLSA exception for ministers and clergy in some appellate courts, which I’ll address in my next post.
Doug Hass is an associate at Franczek Radelet and the primary author of Wage & Hour Insights Blog.
