In Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (1985), the Supreme Court unanimously ruled that “minimum wage, overtime, and recordkeeping requirements of the Fair Labor Standards Act” (FLSA) applied to workers “engaged in the commercial activities of a religious foundation” even if they did not consider themselves to be employees. It also ruled that these requirements did not violate the religion clauses of the First Amendment.

In the opinion for the Court, Justice Byron R. White recognized the Alamo Foundation’s classification as a “nonprofit religious organization” and noted that the individuals who worked in its commercial businesses were not given cash salaries. Instead, the foundation provided for their food, clothing, shelter, and other needs. These activities represented “ordinary commercial activities” that competed “with other commercial businesses.” In those circumstances, the economic reality test indicated that the workers were “employees,” regardless of what they considered themselves to be. White ruled that Congress had not intended to exempt such employees from the FLSA.

The foundation insisted that its businesses were “infused with a religious purpose,” but White credited the findings of the lower courts that the specific enterprises in question were commercial in nature and that they competed with other commercial businesses. White did not believe the free exercise clause required exemption for such entities from governmental regulation unless it burdens their free exercise rights. Subjecting employees to the FLSA did not require that the foundation give them cash wages. Although recordkeeping requirements were not insignificant, they applied only to commercial activities conducted for a business purpose and could be met through “routine and factual inquiries.” This decision is consistent with others, including Jimmy Swaggart Ministries v. Board of Equalization of California (1990), subjecting the commercial activities of religious entities to nondiscriminatory taxation.

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