Pennsylvania’s New Overtime Salary Thresholds Take Effect

The Pennsylvania Department of Labor and Industry’s (DLI) amendments to the regulations that exempt executive, administrative, and professional (so-called “white collar”) salaried workers from overtime requirements under the Pennsylvania Minimum Wage Act of 1968 (PMWA) went into effect on October 3, 2020. The amended regulations were originally approved on January 31, 2020.

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 raise the minimum salary that must be paid to retain the white-collar exemptions, and revise somewhat the duties tests.

The white-collar exemption salary threshold has now been increased to $684 per week ($35,568 annually) from the current threshold of $250 per week ($13,000 annually). That initial increase does not have an immediate practical effect because it brings the threshold in line with the minimum salary threshold under the federal Fair Labor Standards Act (FLSA) regulations that went into effect on January 1, 2020.  Starting in 2021, the threshold increases above the FLSA’s thresholds as follows:

• $780 per week, $40,560 annually on October 3, 2021; and
• $875 per week, $45,500 annually on October 3, 2022.

The DLI will index the salary threshold on October 3, 2023, and every three years thereafter “to the weighted average 10th percentile wages for Pennsylvania workers who work in exempt [white collar] classifications.” Employers may count “nondiscretionary bonuses, incentives and commissions that are paid yearly or more frequently” toward up to 10 percent of the required salary threshold.

The amendments also revised the duties tests to qualify for the white-collar exemptions in order to be more consistent with the FLSA. Notably, the DLI:

• removed the requirement that exempt white-collar employees not devote more than 20 percent of their 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;
• added new definitions that mirror definitions in the FLSA regulations, 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; and
• revised the administrative exemption to specify that an exempt employee’s “primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.”

Despite these changes, the Pennsylvania regulations are not identical to the FLSA regulations. For example, the Pennsylvania regulations do not:

• include exemptions for computer professionals and highly compensated employees that are available under the FLSA regulations (29 C.F.R. § 541.400; 29 C.F.R. § 541.601);
• align the language of the outside sales exemption in the PMWA with the FLSA’s outside sales exemption regulation (29 C.F.R. § 541.500); or
• exempt doctors and lawyers from the salary threshold requirements like the FLSA regulations (29 C.F.R. § 541.304(d)).