What is a Highly Compensated Employee, and Why Does It Matter?
Employees in Palm Beach Gardens and throughout South Florida are due overtime pay at the rate of 1.5 times their normal rate of pay when they work hours in excess of 40 in a workweek. This requirement exists under federal law, the Fair Labor Standards Act (FLSA). Although it applies to a range of employees in Florida, it does not apply to employees who the FLSA designates as “exempt.” To be clear, an exempt employee is not owed overtime wages no matter how many hours they work.
There are numerous exemptions under the FLSA, including for bona fide executive, administrative, professional, computer, and outside sales employees. While these exemptions are commonly discussed, the category of the “highly compensated employee” is another one that results in the employee being exempt and ineligible for overtime pay. For a “highly compensated employee,” the test for exemption is different from the test for other exempt employees. Consider the following information from our Palm Beach Gardens wage and hour lawyers.
Who is a Highly Compensated Employee?
As we noted above, there is a different exemption test for a highly compensated employee, sometimes known as the HCE test, than for the other types of exemptions typically applied to employees. According to the US Department of Labor, the following elements must be true in order for an employee to be an exempt highly compensated employee:
- Employee must earn a total annual compensation amount set by the Code of Federal Regulations (which increases over time);
- Employee’s primary duty is office work or other non-manual work (i.e., the employee is a white-collar employee, as opposed to a blue-collar employee); and
- Employee “customarily and regularly” performs at least one of the duties associated with an exempt employee under one of the executive, administrative, or professional employee exemptions.
If all of the above are not true, then the employee is not an exempt highly compensated employee.
Total Annual Compensation Amount
What is the total annual compensation amount — the first part of that test?
The Code of Federal Regulations requires highly compensated employees to earn at least $132,964 per year as of July 1, 2024. That amount increases to $151,164 on January 1, 2025. It is set to increase again in July 2027 to an amount that is not yet set. If you have questions or concerns about your compensation package and what kinds of pay or benefits count toward the HCE exemption, it is important to seek legal advice.
Contact a Palm Beach Gardens Wage and Hour Lawyer
Being deemed a “highly compensated employee” is really just relevant to your eligibility for overtime pay (or not, as the case may be). It is important to remember that the annual compensation requirements are set by federal law, not by individual employers. Accordingly, if you do not meet the annual compensation requirements — even if you are paid quite highly in your position — you could be eligible for overtime wages. One of the experienced Palm Beach Gardens wage and hour attorneys at Sconzo Law Office can assess your employment situation today and discuss your rights and options with you. Contact our firm for additional information.
Sources:
dol.gov/agencies/whd/fact-sheets/17h-overtime-highly-compensated
ecfr.gov/current/title-29/subtitle-B/chapter-V/subchapter-A/part-541/subpart-G/section-541.601
