Pennsylvania May Raise Minimum Salary for Overtime-Exempt Workers to $45,500

Author: Michael Cardman, XpertHR Legal Editor

October 22, 2019

The minimum salary threshold for most overtime-exempt workers in Pennsylvania would gradually increase to $45,500 over the next three years and then be adjusted for inflation every three years after that under new regulations put forward by the Pennsylvania Department of Labor & Industry (L&I).

The state's Independent Regulatory Review Commission (IRRC), which has the authority to reject any regulations that it deems are not in the public interest, will meet November 21 to decide whether to give the regulations final approval.

If the IRRC approves the final regulations, they would undergo a final review by the state attorney general and then take effect once published in the Pennsylvania Bulletin. If the IRRC rejects the final rule, L&I must either withdraw them or revise and resubmit them.

The Path to $45,500

Under the final regulations, the minimum salary threshold for overtime-exempt executive, administrative and professional employees would increase according to the following schedule:

• $684 per week ($35,568 per year) - on the date of publication in the Pennsylvania Bulletin (note: the same salary threshold takes effect under federal regulations on January 1, 2020);
• $780 per week ($40,560 per year) - one year after the date of publication;
• $875 per week ($45,500 per year) - two years after the date of publication; and
• A rate equal to the 10th percentile of Pennsylvania workers who work in overtime-exempt executive, administrative or professional occupations - three years after the date of publication, and January 1 of each third year thereafter.

As with the federal regulations, employers would 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 make minor revisions to the duties tests intended to make Pennsylvania's employee classification scheme more consistent with the federal Fair Labor Standards Act (FLSA).

Background

Last year, L&I proposed regulations that would have raised the minimum salary level to nearly $48,000. However, the IRRC raised a number of concerns about the proposal and sent L&I back to the drawing board. L&I solicited public feedback and organized roundtables with stakeholders in the business community before submitting new regulations to the IRRC on October 17.

L&I estimates that 143,000 workers will benefit from the new regulations, meaning their employers will have to either raise their salaries or reclassify them as nonexempt and pay them overtime if they work more than 40 hours in a workweek. This will cost businesses an average of $210 - $279 per affected worker each year, L&I estimates.

L&I's preamble to the final regulations states, "[T]he current salary thresholds are irrelevant because virtually all white-collar workers make a higher salary than the salary threshold. This rulemaking sets the salary threshold for all [executive, administrative and professional] exemptions at the weighted average of 10th percentile wages for exempt occupations and ... will act as a real threshold to ensure that salaried workers are properly classified."