Pennsylvania employers must be prepared to comply with new overtime rules proposed by Governor Wolf on January 17. The minimum salary level that determines overtime eligibility will be increased and clarification provided for the duties test for executives, administrators and professionals. Details of the changes will be issued by the Pennsylvania Department of Labor and Industry in March.
Many employers will remember that President Obama attempted such a change at the federal level before leaving office. The Department of Labor issued a final ruling that doubled the salary threshold for exemption from overtime pay from $23,360 to $47,476. The ruling was met with opposition and law suits from business groups trying to block implementation of the new standard. The federal district court in Texas where the suit was filed issued a preliminary injunction that found the DOL regulation unlawful saying it was essentially a “de facto salary test” with not enough consideration for the duties test required by law. Despite an appeal from the DOL eventually the district court’s ruling became final and the overtime rules were never implemented.
Pennsylvania overtime regulations have seen no changes in more than 40 years. The proposed updates by Governor Wolf would be implemented in phases. Currently the standard for exemption from overtime pay is $23,660 annual salary or $455 per week. The first phase of the Governor’s plan would begin on January 1, 2020 and raise it to $31,720 annual salary or $610 per week. The next year on January 1, 2021 would see another increase to $39,832 annual salary or $766 per week. The final phase beginning January 1, 2022 would raise it again to $47,892 annual salary or $921 per week. The new regulations are also supposed to provide greater clarity as to the duties test for executive, administrative, and professional employees.
If implemented the plan could extend overtime eligibility to almost one in eight employees over the next four years. That translates to up to 460,000 more workers. Additionally, the proposal includes a stipulation that the salary threshold be updated automatically every three years to keep up with inflation.
It is important to note that while Governor Wolf has proposed these updates to Pennsylvania overtime regulations, only the Department of Labor and Industry can effect any changes in the law. After releasing a Notice of Proposed Rulemaking in March, there will be a required period (usually 30 days) for public comment and review before any final action is taken.
Employers are free to submit comments on the proposed changes which the Department of Labor and Industry is obligated to review and forward to both the Independent Regulatory Review Commission (IRRC)and the legislative standing committee. Comments become part of the public record and the Department must respond to them when it submits its final regulation. The IRRC evaluates the economic and financial impact of new regulations, ensures that they are reasonable and must approve them before they can take effect. IRRC board members are appointed and currently the board consists of three appointees made by Democrats and two who were appointed by Republicans.
Pennsylvania employers would be well advised to take stock of their employee classifications and salaries to assess how the proposed regulations could affect them going forward and to submit their comments and input to the Department of Labor and Industry.