Key Takeaways
- Exempt versus non-exempt classification depends on salary level, salary basis, and job duties, not job title.
- Misclassifying non-exempt employees as exempt is the most common FLSA violation and can result in back pay for years of unpaid overtime.
- Florida's state minimum wage adjusts annually each September and is higher than the federal rate.
- The regular rate of pay for overtime calculations must include non-discretionary bonuses and shift differentials.
Exempt vs. Non-Exempt Classification
The FLSA divides employees into two categories: exempt and non-exempt. Non-exempt employees must be paid at least minimum wage and overtime (time-and-a-half) for hours worked over 40 in a workweek. Exempt employees are excluded from overtime requirements, but only if they meet all three tests: salary level, salary basis, and job duties.
The salary level test requires that the employee earn at least a specific threshold per week (this threshold is updated periodically by the Department of Labor, so verify the current amount). The salary basis test requires that the employee receive a predetermined salary that is not subject to reduction based on the quality or quantity of work. The duties test requires that the primary duties involve executive, administrative, professional, computer, or outside sales responsibilities as defined by the FLSA.
The Duties Test Is Where Most Mistakes Happen
Job title does not determine exempt status. The actual duties performed do. An "office manager" who spends 80 percent of their time on routine administrative tasks and does not supervise two or more employees is likely non-exempt, regardless of their title or salary. A "director" who does not exercise independent judgment on matters of significance is likely non-exempt.
The administrative exemption requires the exercise of discretion and independent judgment on matters of significance. Routine application of procedures, even complex ones, does not qualify. The executive exemption requires managing the enterprise or a department, directing the work of two or more employees, and having authority to hire and fire. Each exemption has specific requirements that must be met in full.
How to Calculate Overtime Correctly
Overtime is time-and-a-half the regular rate of pay for all hours worked over 40 in a workweek. The regular rate is not just the hourly wage. It must include all non-discretionary bonuses, shift differentials, and certain incentive pay. If you pay a production bonus, it must be factored into the regular rate for the weeks it covers.
A common mistake is paying a "day rate" or "shift rate" without calculating overtime. If a non-exempt employee is paid a flat rate for a shift, you must still calculate their regular rate by dividing the total weekly pay by the total hours worked, then pay time-and-a-half that rate for hours over 40. Another common mistake is docking PTO for partial-day absences for exempt employees, which can destroy the salary basis and convert the employee to non-exempt.
Florida Minimum Wage
Florida has a state minimum wage that is higher than the federal rate and adjusts annually each September. You must pay the higher of the federal or state rate. The adjusted rate is published by the Florida Department of Economic Opportunity. Tipped employees have a lower direct wage, but their tips plus direct wage must equal the full minimum wage.
Florida also requires annual poster updates reflecting the new minimum wage. Failing to display the current poster is a compliance violation, even if you are paying the correct wage. PEO partnerships include poster compliance updates as part of the service.
What Triggers a DOL Audit
The Department of Labor investigates FLSA violations through both targeted enforcement and employee complaints. The most common triggers are employee complaints about unpaid overtime, misclassification, and off-the-clock work. Once an investigation begins, the DOL can examine records for all employees, not just the one who complained.
If violations are found, you can owe back wages for two years (or three years for willful violations), plus liquidated damages equal to the back wages, effectively doubling the amount owed. For a business with multiple misclassified employees, the total can be devastating. Proper classification and accurate timekeeping are the best prevention.
Frequently Asked Questions
Can I pay an employee a salary and avoid paying overtime?
No. Paying a salary does not make an employee exempt. The employee must meet the salary level, salary basis, and duties tests. If they do not meet all three, they are non-exempt and must be paid overtime for hours over 40, even if they receive a salary. You must also track their hours.
What is the current Florida minimum wage?
Florida's minimum wage adjusts annually each September. The current rate is published by the Florida Department of Economic Opportunity. You must pay the higher of the federal or state rate. Check the current rate at the beginning of each fiscal year and update your pay rates and posters accordingly.
How far back can the DOL go for unpaid overtime?
The standard statute of limitations is two years. For willful violations, it extends to three years. Liquidated damages equal to the back wages owed can double the total. This means a single misclassified employee can result in several years of back overtime plus an equal amount in damages.