On January 17, 2018, Pennsylvania Governor Tom Wolf announced an initiative to “modernize” Pennsylvania’s overtime rules.
Governor Wolf has directed the Pennsylvania Department of Labor and Industry to develop a plan to clarify the overtime regulations and increase the salary threshold for overtime exemptions over the course of four years. Currently, the annual salary threshold for overtime exemptions is $23,600. The governor’s plan would increase that threshold to $31,720 in 2020, $39,832 in 2021, and $47,892 in 2022. Governor Wolf estimates that this will extend overtime eligibility to 460,000 additional employees by 2022. In addition, after 2022, Governor Wolf’s plan will automatically update the salary threshold every three years.
The new plan will also clarify the duties tests for the executive, administrative, and professional exemptions. In conjunction with paying employees on a salary basis and meeting the salary threshold, these tests determine whether certain employees may be exempt from overtime requirements.
While Governor Wolf’s plan calls for a graduated increase in the salary threshold, it echoes the United States Department of Labor’s proposed overtime regulations issued under the Obama administration in May of 2016. Those proposed regulations aimed to automatically increase the salary threshold to $47,476 on December 1, 2016. Though the implementation of those rules was enjoined, the federal agency has recently solicited comment regarding the salary threshold, indicating that it may seek to implement a smaller increase.
The Pennsylvania Department of Labor and Industry expects to release the updated rules for public comment in March of 2018. The rules must then be approved by a five-member board appointed by the governor.
In anticipation of these changes, Pennsylvania employers may want to contemplate classification of currently exempt employees and consider whether such employees may need to be reclassified given the potential changes in the duties tests and increased salary thresholds.