Running a successful community association involves juggling many responsibilities – ensuring residents are happy, maintaining common areas, and keeping operations running smoothly at all times. But one crucial area that often gets overlooked and could be a significant source of risk is wage and hour compliance. Getting it wrong when it comes to association staff can lead to costly lawsuits, government investigations, and significant financial penalties. Note that this article is intended for those associations with personnel/employees who are directly employed by the association. If the personnel/employees are employed by the association’s management company, the management company will be responsible for compliance with wage and hour laws.
One of the most common mistakes associations make is misclassifying employees as exempt (not entitled to overtime) when they should be non-exempt (eligible for overtime pay). To qualify as exempt, an employee must meet both, the salary test and the duties test. For the salary test, the employee must be paid a fixed salary of at least $684 per week ($35,568 annually). For the duties test, the employee’s job duties must fall under at least one of the specific exemptions. Some common exemptions are the executive exemption, which usually includes supervisors who manage other employees; and the administrative exemption, which usually includes employees handling significant, independent business decisions. If an employee does not meet both of these requirements, they are non-exempt and must be paid overtime (1.5x their regular rate) for any hours worked beyond 40 in a workweek.
Another common mistake is not paying the correct minimum wage. Florida has a higher minimum wage than the federal rate, and it is increasing every year. As of September 2024, the minimum wage is $13.00 per hour and will increase to $14.00 per hour in September. By 2026, it will reach $15.00 per hour. Associations need to make sure pay is adjusted to stay compliant. Florida’s minimum wage goes up every September 30th. Associations also need to be wary of improper wage deductions, which can create minimum wage violations. Employers cannot reduce an employee’s pay below minimum wage for things like failing to return uniforms, tools, or other property belonging to the association.
Even when associations get minimum wage and exemptions right, overtime violations are another common compliance issue. Some of the biggest overtime mistakes are:
- “Off-the-clock” work – If maintenance or security staff answer calls after hours or check emails at home, that is compensable work, and it must be paid.
- Not tracking hours accurately – Employers must maintain at least three years of payroll records to comply with federal law.
- Averaging hours over multiple weeks – Each week stands alone under the Fair Labor Standards Act. An employee working 30 hours one week and 50 the next must be paid 10 hours of overtime for the second week.
But just because mistakes happen, does not mean they are inevitable. To avoid these mistakes, associations should conduct regular wage audits, reviewing job classifications and pay structures annually. Associations should also use an electronic timekeeping system designed to prevent off-the-clock work and inaccurate records. Managers should be trained on wage and hour laws. A well-intentioned manager asking an employee to “just take care of something real quick” after hours can lead to unpaid wage claims. Associations should stay up to date on the law.
For most communities, the cost of non-compliance just does not make cents [pun intended]. Associations should be proactive in ensuring employees are classified correctly, paid fairly, and tracked accurately to avoid legal trouble. Whether your association employs an on-site manager, security guards, or maintenance personnel, following these best practices will keep your payroll compliant and keep you out of court.
If you have questions about wage and hour compliance, Becker can help.
