Pennsylvania Hikes Minimum Salary for Overtime-Exempt Workers to $45,500 by 2022
Author: Michael Cardman, XpertHR Legal Editor
October 2, 2020
The minimum salary threshold for most overtime-exempt workers in Pennsylvania will increase to $45,500 over the next three years and then be adjusted for inflation every three years after that.
Under regulations finalized today by the Pennsylvania Department of Labor & Industry (L&I), the minimum salary threshold for overtime-exempt executive, administrative and professional employees increases according to the following schedule:
- October 3, 2020 - $684 per week ($35,568 per year);
- October 3, 2021 - $780 per week ($40,560 per year);
- October 3, 2022 - $875 per week ($45,500 per year); and
- October 3, 2023, and October 3 of every third year thereafter - A rate equal to the weighted average 10th-percentile wages for Pennsylvania workers who work in exempt executive, administrative or professional classifications as determined by L&I with advice and consultation by the Minimum Wage Advisory Board and based on an annual wage survey of all worker classifications conducted by the L&I.
The L&I said the new salary thresholds will protect Pennsylvania employees from being arbitrarily designated as exempt and required to work excessive overtime hours without additional compensation. The current federal salary threshold of $35,568 "is based upon the earnings of the lowest-paid salaried employees in the nation and is not reflective of this Commonwealth's economy," the agency said.
According to the L&I, the new rates:
- Take into account the economic realities in Pennsylvania;
- Are based on more relevant, Pennsylvania-specific data; and
- Adjust the salary threshold at regular intervals where the data support an adjustment.
L&I explained that this approach "replaces infrequent, dramatic changes caused by sporadic rulemaking with more predictable and modest changes" by maintaining the salary level at a fixed percentage of earnings. This will help ensure that the test continues to reflect actual wage conditions consistent with the duties of exempt employees and provide a gradual threshold adjustment between comprehensive rulemaking, the L&I said.
As with the federal regulations that took effect earlier this year, employers will be allowed to count nondiscretionary bonuses, incentives and commissions to satisfy up to 10% of the standard salary level, as long as they are paid annually or more frequently.
The final regulations also revise the duties tests for executive, administrative and professional employees to make Pennsylvania's employee classification scheme more consistent with the federal Fair Labor Standards Act (FLSA).