Legal Alert

PA DOL Proposes Significant Changes to Overtime Exemptions

June 29, 2018

Pennsylvania's Department of Labor and Industry (PA DOL) released proposed regulations that would alter when an employee can be classified as exempt from overtime wages under Pennsylvania law in two important ways: first, in dramatically raising the salary threshold for employees working in executive, administrative, and professional (EAP) capacities, and second, in bringing the definitions of these exemptions more in line with the corresponding exemptions under the federal Fair Labor Standards Act (FLSA).

Currently, the state's requirements under 34 Pa. Code 231 differ from the FLSA, making compliance difficult for employers.The proposed rule would eliminate the existing two-tier salary threshold and replace it with a single, significantly higher, escalating minimum salary modeled on FLSA regulations that were blocked in November 2016 before they took effect. The FLSA regulations were subsequently abandoned by the Trump Administration, which has since announced that it is planning its own rulemaking on the overtime provisions.

The proposed Pennsylvania changes would increase the minimum salary threshold to $610 per week upon the rule's effective date, $766 per week one year later, and $921 per week two years later. Further, in the third year following adoption—and every three years thereafter—the salary threshold would rise to equal the "30th percentile of weekly earnings of full-time non-hourly workers in the Northeast Census region."

Like the proposed federal rule, up to 10 percent of the salary threshold could be met by payment of nondiscretionary bonuses, incentives and commissions paid at least quarterly.

The changes to the duties test are designed to more closely align with the FLSA tests for the EAP exemptions. The rules do not, however, include sales or computer professional exemptions, which exist under the FLSA, but not under Pennsylvania law. The regulations also do not incorporate the many FLSA regulations addressing what it means to be paid on a salary basis—continuing to leave that term undefined in Pennsylvania. As a result, companies with Pennsylvania employees should continue to exercise care in ensuring that their payment practices satisfy all FLSA and Pennsylvania law requirements to avoid liability.

The proposed changes were published in the June 23 issue of the Pennsylvania Bulletin—beginning a 30-day period for the submission of public comments, suggestions, or objections.

Attorneys in Ballard Spahr's Labor and Employment Group routinely assist and counsel public sector employers about labor issues, including collective bargaining, and employment issues regarding civil rights and constitutional changes.

Copyright © 2018 by Ballard Spahr LLP.
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