Pennsylvania May More Than Double the Salary Threshold to Qualify for Overtime Exemptions

On January 31, 2020, the Pennsylvania Independent Regulatory Review Commission approved the Pennsylvania Department of Labor and Industry’s (DLI) amendments to 34 Pa. Code Chapter 231, the regulations that exempt executive, administrative, and professional (“white collar”) salaried workers from overtime requirements under the Pennsylvania Minimum Wage Act of 1968. Under the regulations, for an employer to classify an employee as exempt and ineligible for overtime, the employee must be paid a certain minimum salary and his or her job duties must meet the requirements of certain defined tests. The amended regulations substantially raise the minimum salary that must be paid to retain the white-collar exemptions, and revise somewhat the duties tests. The amended regulations will not go into effect until Pennsylvania Attorney General Josh Shapiro approves them and they are published in the Pennsylvania Bulletin.

The immediate impact of the new regulations may be minimal for employers whose workers are covered by the federal Fair Labor Standards Act (FLSA) because in the first year of the new regulations, the white-collar salary threshold will be equal to the minimum salary threshold set by the U.S. Department of Labor on September 24, 2019, under the FLSA. After the first year, however, the impact on employers could be substantial because Pennsylvania’s minimum white-collar threshold will exceed the minimum FLSA threshold. The DLI estimates that 82,000 Pennsylvania workers will be impacted by the new regulations.

New Salary Threshold

The amended regulations would increase the white-collar exemption salary threshold from the current threshold of $250 per week ($13,000 annually) as follows:

• $684 per week ($35,568 annually) on the date the final rule is published in the Pennsylvania Bulletin
• $780 per week ($40,560 annually) one year after the publication of the final rule
• $875 per week ($45,500 annually) two years after the publication of the final rule

The salary threshold would be updated three years after the publication of the final rule and each third year thereafter. Further, the amended regulations would permit 10 percent of the salary threshold to be satisfied with the payment of “nondiscretionary bonuses, incentives and commissions that are paid annually or more frequently.”

Revised Duties Test

The DLI revised the duties tests to qualify for the white-collar exemptions in order to be more consistent with the FLSA. In furtherance of that objective, the amended regulations would eliminate the requirement that exempt white-collar employees not devote more than 20 percent of their hours in a workweek to activities that are not “directly and closely related to” or “an essential part of and necessarily incident to” the exempt duties outlined in the regulations. The amended regulations also add new definitions that are nearly identical to definitions in the FLSA, such as the definition of “management” for the executive exemption and the definition for work “directly related to management or general business operations” under the administrative exemption. Further, like the FLSA, the amended regulations now specify that an employee must exercise discretion and independent judgment “with respect to matters of significance” in order to qualify for the administrative exemption.

Despite the DLI’s objective to align with the FLSA, the amended regulations do not include a computer professional or highly compensated employee exemption (two exemptions available under federal law, but not under Pennsylvania law).

We will monitor developments and provide updates as available on the Pennsylvania blog.