Did you know in Florida a salary employee making less than $43,888 must be paid overtime pay?

As of July 1, 2024 the lowest amount a Florida employer can pay an employee in order to meet a typical white collar “exemption” is now $844/week, which is $43,888 annualized.

Employees are exempt under section 13(a)(1) of the Fair Labor Standards Act (FLSA), if they are employed in a bona fide executive, administrative, or professional (EAP) capacity. This exemption from the FLSA is sometimes referred to as the “white-collar” or “EAP” exemption.

 What determines if a Florida employee falls within the white collar exemption?

Currently, to fall within the white collar (EAP) exemption, an employer must prove three things:

1. The employee in question is paid a salary, meaning that they are paid a predetermined and fixed amount that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”). This means you don’t pay less if the employee only works 35 hours/week instead of 40;
2. The employee must be paid at least a specific weekly salary level (the “salary level test”); and
3. The employee must primarily perform executive, administrative, or professional duties, as provided in the Department of Labor’s regulations (the “duties test”). This is the hard part of the test.

Certain employees, such as doctors, lawyers, teachers, and outside sales employees, are not subject to either the salary basis or salary level tests; employees in these occupations may fall within the EAP exemption regardless of how and what they are paid. The Department of Labor’s regulations also provide an alternative test for certain highly compensated employees (“HCEs”) who are paid a salary, earn at least a higher total annual compensation level, and satisfy a minimal duties test.

It is important to note that paying a minimum of $844/week ($43,888 annualized) is the new part of the test.  It is also the easy part of the test.

EARNINGS THRESHOLDS

What did the Department of Labor change in 2024 about paying salaried employees?

In 2024 the Department of Labor made the following changes:

• On July 1, 2024, the standard salary level increased, raising the salary level from $684 per week to $844 per week (equivalent to $43,888 per year). For highly compensated employees, the annual compensation level to be exempt from overtime pay increased from $107,432 to $132,964.
  
• On January 1, 2025, the Department of Labor (DOL) will implement the new salary methodology, setting the standard salary level at the 35th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region (the South), resulting in a salary level of $1,128 per week (equivalent to $58,656 per year). For highly compensated employees, the compensation level will be set at the annualized weekly earnings of the 85th percentile of full-time salaried workers nationally, resulting in a compensation level of $151,164.
  
• The DOL plans on future updates to the salary and compensation levels occurring every three years and will apply up-to-date wage data to the salary and compensation methodologies in the regulations at the time of the update. The next three-year update will take place on July 1, 2027.
  

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When is the final rule effective?

The final rule became effective on July 1, 2024, but some increases to the EAP earnings thresholds will become applicable on future dates. All of the scheduled increases are displayed in the chart below:

The "old" rule (prior to July 1, 2024) was that the employee had to be paid a minimum of  $684 per week (equivalent to $35,568 per year); or for the highly compensated exemption, $107,432 per year, including at least $684 per week paid on a salary or fee basis.

Beginning on July 1, 2024 the big change was that the minimum salary level became $844 per week (equivalent to $43,888 per year); or for the highly compensated exemption (HCE), $132,964 per year, including at least $844 per week paid on a salary or fee basis.

What the future holds?  Beginning January 1, 2025 the minimum salary level will increase to $1,128 per week (equivalent to $58,656 per year); or for the HCE, $151,164 per year, including at least $1,128 per week paid on a salary or fee basis.

Beginning on July 1, 2027, and every 3 years thereafter additional increases are planned to take place at an amount that is to be determined by applying to available data the methodology used to set the salary level in effect at the time of the update.

There is litigation that may stop some or all of these changes, but currently the July 1 increases are already in place, and apply to Florida employers.

Must salaried employees earning below the new salary level be converted to hourly pay?

No. Salaried workers earning below the new salary threshold may continue to be paid a salary, as long as that salary is equivalent to a base wage at least equal to the minimum wage rate for every hour worked, and the employee receives a 50% premium on that employee’s regular rate for any overtime hours each week.  This means if you currently have an employee making $800/week in salary, you need to increase it to at least $844/week to maintain the employee’s exempt status

How should a Florida employer respond to the updated salary thresholds for exempt employees?

Employers have a range of options for responding to the updated thresholds. For each employee who is affected by the increased earnings threshold, an employer may:

• increase the salary of the employee to at least the new salary level to retain their exempt status; or
  
• pay an overtime premium of one and a half times the employee’s regular rate of pay for any overtime hours worked; or
  
• reduce or eliminate overtime hours; or
  
• reduce the amount of pay allocated to the employee’s base salary (provided that the employee still earns at least the applicable hourly minimum wage) to offset new overtime pay; or
  
• use some combination of these responses.
  

As a practical matter, Florida employers may be more likely to give raises to employees who regularly work overtime and earn slightly below the new standard salary level, in order to maintain their exempt status so that the employer does not have to pay the overtime premium. For employees who rarely work overtime hours, employers may simply choose to pay the overtime premium whenever necessary.

Will employees newly entitled to overtime pay have to record their hours on a daily basis or punch a time clock when they start or stop work?

Employees entitled to overtime pay are not required to punch a time clock, but the FLSA requires that employers keep certain records for each nonexempt employee so those workers can be sure that they get paid what they earn and are owed, including time and one half of their regular rate of pay when they work more than 40 hours in a workweek. Employers have options for accounting for employee’s work hours—some of which are very low cost and burden. There is no particular form or order of records required and employers may choose how to record hours worked for overtime-eligible employees. For example, when an employee works a fixed schedule that rarely varies, the employer may simply keep a record of the employee’s regular schedule and then record any variations from that schedule (“exceptions reporting”).

I am paid a salary and my job title is manager. Am I exempt from overtime pay?

Job titles do not determine EAP exemption status, and the fact that an employee is paid on a salary basis is not alone sufficient to exempt that employee from the FLSA’s minimum wage and overtime requirements. For the exemption to apply, an employee’s specific job duties and salary must meet all of the applicable requirements provided in the Department of Labor’s regulations.

Feel free to call our office at 1-772-465-5111 or email us if you would like to discuss this further.  Many Florida employers are likely unaware of this change in the regulations that were rolled out in 2024.

Law Office of David Miklas, P.A.

Labor & Employment law - Employers only