A significant change to federal labor law is set to take effect on July 1, potentially affecting thousands of workers and businesses in Northwest Florida. 

• The Department of Labor’s new rule, which increases the salary threshold for overtime eligibility, is poised to reshape employment practices and compensation structures across various industries in the region.

The rule, from the Biden-Harris administration, will raise the minimum salary for most exempt employees in two stages. Starting July 1, 2024, the threshold will increase from the current $35,568 to $43,888 annually. A further increase to $58,656 is scheduled for Jan. 1, 2025.

Erin Sarria, Director of HR and Client Engagement at SimpleHR in Destin, explains the immediate impact:

“Starting July 1st, if you are currently a salaried exempt employee, you must get paid a minimum of $43,888 per year to remain exempt under the new exempt threshold. If you are not making at least that amount per year or $844 per week, then the DOL is saying this employee is no longer exempt and needs to be paid overtime for all hours worked over 40 in a work week.”

This change means that most exempt salaried employees making less than the new threshold must be reclassified as non-exempt workers and paid overtime for hours worked beyond 40 per week. The rule aims to restore and extend overtime protections, ensuring that lower-paid salaried workers receive fair compensation for long hours.

• While specific data for Northwest Florida is not available, the Department of Labor estimates that more than 3 million currently exempt employees nationwide will be impacted by the change. The rule is part of a broader effort to update the Fair Labor Standards Act’s overtime protections.

Local Impact

Sarria anticipates that tourism, hospitality, and retail industries in Northwest Florida will be most affected by the new rule. “Middle management positions typically require overtime work, and businesses that operate on thin margins will likely feel the impact most acutely,” she noted.

The concerns of local businesses are primarily financial. “Their main worries are consistently having to pay overtime or keeping employees on call,” Sarria explained. “The financial burden of either increasing wages or paying overtime is their biggest concern.”

To adapt to these changes, local businesses may need to consider various strategies:

1. Restructuring operations to reduce overtime hours
2. Hiring more part-time employees to distribute workload
3. Raising salaries to meet the new threshold for exemption
4. Redistributing responsibilities among existing staff

“It could be where they’re not hiring as much and maybe they’re shifting responsibilities to other staff members, or they are going to try and control the overtime and hire more employees,” Sarria said. “But we know the challenges of even finding staff as it is. So that’s the double-edged sword.”

Challenges for Small Businesses

Small businesses in Northwest Florida may face unique challenges in adapting to the new rules. Sarria outlined several potential hurdles:

1. Financial strain and increased labor costs
2. Cash flow management
3. Balancing higher payroll expenses with existing operation costs
4. Operational changes, such as requiring employees to track time or clock in and out
5. Compliance and administrative burdens, including updating employee contracts and records

Potential Benefits for Workers

While the changes present challenges for employers, they could lead to benefits for some workers in the area. Sarria noted, “The higher wages, but possibly it’s less burnout. If the employers can change employees to hourly and decide not to work them overtime to control costs, it could be less burnout for the employee.”

The rule change could also lead to more specialized job roles. “They could raise the salary wages to meet the new salary threshold, and that could potentially lead to more experience or specialized skills. You could expand what that position’s requirement is,” Sarria explained.

Seasonal Employment Considerations

Given Northwest Florida’s reliance on tourism, the new rule could affect seasonal employment patterns. Sarria predicts, “Seasonal employment would increase as management tries to hire more temporary staff during the peak season.” However, she noted that seasonal employees are typically hourly workers already, so the impact may be limited.

Preparing for Change

As the July 1 deadline approaches, Sarria advises local businesses to take several steps:

1. Review current workforce and identify employees impacted by the change.
2. Analyze whether affected employees are currently working over 40 hours per week.
3. Calculate potential costs of different compliance strategies.
4. Develop a plan for moving forward.
5. Communicate changes clearly to employees.
6. Train staff on any new policies or procedures.

“You want to continuously monitor the impact and make adjustments if necessary,” Sarria emphasized. She also cautioned that while businesses should prepare for both the July 1 and January 1 changes, they might want to wait before implementing wage increases for the latter date. “That second increase is pretty aggressive, and so it may have some challenges in court. It’s uncertain right now.”

Employers seeking to educate themselves about these changes have several options. Sarria recommends that employees speak directly with their managers for the most accurate information about how the changes will affect them personally. 

SimpleHR’s Role

SimpleHR offers assistance to local businesses navigating these changes. “We provide hands-on guidance to all our clients to help them stay in compliance when there are these types of changes,” Sarria explained. The company conducts full salary audits for its clients, identifying impacted employees and works directly with client businesses to decide on the best path forward.

• “For all of our clients, we do a full salary audit and we identify which employees are impacted. Then we work directly with the client to decide how they want to move forward and we go ahead and make the adjustment in payroll. We try to make it as easy as we can,” Sarria said.

As Northwest Florida businesses prepare for this significant change to federal labor law, the full impact on the local economy remains to be seen. However, with proper preparation and guidance, employers can navigate these changes while ensuring fair compensation for their workforce.