Legal Alert: U.S. Department of Labor Publishes Final Rule Increasing Overtime Exemption Thresholds
What Florida Businesses Need to Know to Prepare for the New Overtime Exemption Rule
Florida employers with employees working more than 40 hours in a week need to pay overtime unless specific exemption criteria are satisfied. One of these is known as the minimum salary requirement, which is set to increase on June 1, 2024, and again on January 1, 2025. The U.S. Department of Labor (DoL) has issued a final rule affecting how Florida business owners can classify exempt and nonexempt employees under the Fair Labor Standards Act (FLSA), particularly for executive, administrative, and professional employees (EAP employees) and highly compensated employees. Here’s what you need to know to keep your business in compliance with these changing overtime exemption thresholds.
Updated Salary Thresholds for Executive, Administrative, and Professional Employees
The DoL allows for certain federal overtime exemptions to be made for EAP employees as defined by their regulations. These definitions break down as follows:
- Executive employees manage or supervise at least two full-time employees or their equivalent (e.g. one full-time employee and two part-time employees). They also must either have the ability to hire and fire employees or their input on hiring and firing employees must be strongly considered.
- Administrative employees do non-manual work and help manage the business. Their responsibilities require discretion and independent judgement.
- Professional employees are those whose responsibilities require the consistent exercise of discretion and judgement that requires an advanced degree, or their work must involve invention and originality.
To qualify for an EAP overtime exemption, the employee must also meet the DoL’s set salary threshold. The new federal overtime exemption rule increases the original EAP exemption threshold of $684 a week ($35,568 annually) to:
- $844 a week ($43,888 annually) on July 1, 2024, and
- $1,128 a week ($58,656 annually) on January 1, 2025.
For more, see the DoL’s EAP fact sheet.
Updated Salary Thresholds for Highly Compensated Employees
Florida businesses can also obtain exemptions for highly compensated employees. These are employees who primarily do office or non-manual work, regularly perform at least one exempt duty of an EAP, and are paid a salary that meets the DoL’s specific threshold. Under the new rule, the previous exemption threshold of $107,432 annually at a minimum rate of $684 a week will be increased to:
- $132,964 annually ($844 weekly minimum) on July 1, 2024, and
- $151,164 annually ($1,128 weekly minimum) on January 1, 2025.
Will There Be Any More Updates to Federal Overtime Regulations Under the New Rule?
Under the new federal overtime exemption rule, salary and compensation thresholds will be updated every three years using up-to-date wage data. Following this year’s change, the next update will occur on July 1, 2027. The DoL says that this will help ensure that their tests and standards will keep up with changing economic conditions. Under the new rule, the DoL also has the authority to temporarily delay these periodic updates due to unforeseen circumstances. It’s important to note that the DoL can still issue other new rules in the future, too.
How Can My Florida Business Prepare for the New Overtime Rule?
First, gather all your compensation data for your exempt employees and sort out those who fall short of the new overtime exemption threshold. Next, review your Florida business’s budget and employment agreements while looking for positions that can be restructured, reclassified, or given a raise to meet the DoL’s exemption standards. You will then want to calculate if it would be more cost-effective to raise employee salaries or to reclassify their positions.
As you do this, keep in mind that you need to consider both salary and job duties when dealing with reclassification. It’s also important to think long-term here because of the DoL’s scheduled changes moving forward. For more guidance on preparing your Florida business for the DoL’s new rule, you can review their small entity compliance guide here. Be sure to take action now, or else your Florida business could end up paying out far more in overtime than it would otherwise.
What Happens if My Florida Business Doesn’t Meet the New Salary Thresholds?
If an employer fails to meet the exemption threshold under the DoL’s new overtime rule, then they can make a final, one-time catch-up payment to bridge the gap. However, this must be done before the first pay period of the next year, or the employee will be entitled to that year’s overtime pay.
Does your Florida business need help navigating the DoL’s new overtime exemption requirements? Contact our corporate law firm today for legal assistance with your Florida business’s employment agreements or to consult with an attorney about how to move forward by scheduling with us online or by calling us at (727) 279-5037.
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