Judging from the questions I receive, there is still significant confusion about who is a church employee and who is an independent contractor.
A landmark decision by the California Supreme Court in 2018 makes it significantly more difficult to classify employees as independent contractors. Employees are entitled to minimum hourly wages, rest and meal breaks, paid overtime and paid sick leave. Independent contractors typically set a price for the work they perform based on time, materials and personal expertise. Misclassifying employees as contractors can make a big difference when it comes to the number of “employees” a church has.
Questions concerning musicians, custodians, volunteers and “ministers” are the most common I receive when it comes to churches and compensation. If the church is paying musicians or others to perform during the worship service on Sunday, they are almost never going to qualify as independent contractors, because they are not free to determine their own work hours, the work they perform or the manner in which they perform it.
As employees, their “compensation” could fall below minimum wage ($11 or $12 — or more — per hour depending on your location), exposing the church to penalties and, under certain circumstances, employees could be owed missed rest and meal break penalty compensation.
Custodians and handymen can be especially troublesome. Is the work a daily chore or a once-a-week activity? Does the person have freedom to choose when and how to perform the work, use his own tools or have a regular business? Is she required to be on site daily?
Giving a church member, attender or anyone else “something to do” in exchange for a cash “benevolence” almost certainly makes that person an employee, as does giving cash or cash equivalents to “volunteers” in “recognition of” their service. Again, the main concern involves minimum wage violations.
A primary determinant is on whom a person relies for his compensation. Independent contractors are self-reliant ... that is, they continually seek new work. They have no guarantee of income from day to day, and cannot be “fired,” because they are self-employed. Employees, on the other hand, are economically dependent on their employer for wages and may be fired for any reason (or none at all).
Employees are generally told when and where to report, what to do and how to do it, with little or no exercise of independent judgment. Most persons paid by the church fit this definition.
“Ministers” are employees engaged in ministry as their principal activity. They often have specialized education, perform sacramental services and are usually licensed or ordained. Simply giving a person a “minister” title or a “salary” to avoid income tax withholding, FICA, minimum wage law, and overtime pay is improper and must be avoided.
To sort out the complexities of your church’s unique situation, email firstname.lastname@example.org or call 559-256-0858.