Just When You Thought It Was Safe to Go Back in the Water: PA Takes Charge—Raising White Collar Exemption Salary Threshold

Jason E. Reisman

Proclaiming it an effort to strengthen the middle class in Pennsylvania, Governor Tom Wolf announced this week a proposal to modernize the Commonwealth’s outdated overtime rules to increase pay for nearly a half million workers—he’s instructed the Department of Labor & Industry (“DOLI”) to update the white collar exemption overtime regulations and more than double the salary threshold necessary to be exempt from overtime. Sound familiar?

As you remember, in 2016, the U.S. Department of Labor issued a final regulation that would have increased the minimum salary amount required to be exempt from $23,660 per year to $47,476 (from $455/week to $913), and installed an automatic escalator to adjust that amount every 3 years. Though it threw the employer world for a loop when issued, a federal court enjoined and then struck the regulation down. Although many employers took measures to implement the new federal rule, many more did not—and ultimately breathed a long sigh of relief when the rule died. It may be safe to now take Pennsylvania employers off of that “relief” list.

The governor’s new plan will phase in over four years and, according to his press release, will “modernize rules and clarify requirements.” Sounds familiar. Here’s what Governor Wolf directed the DOLI to do:

  • On 1/1/20, raise the exempt salary level from $455/week ($23,600/year) to $610/week ($31,720);
  • On 1/1/21, increase it to $757/week ($39,382/year); and
  • On 1/1/22, increase it to $921 ($47,892/year).

According to the governor, this will extend overtime eligibility to 370,000 Pennsylvania workers initially, and up to 460,000 in four years.

Plus—just like the U.S. DOL’s attempt—the DOLI will include a procedure to automatically update the salary threshold every three years, starting in 2022.

Here’s the kicker—PAY ATTENTION—the press release makes clear that the duties for the executive, administrative, and professional exemptions will be “clarified to make it easier for employers to know if a worker qualifies for overtime.” At this time, no one knows what types of clarifications will be made to the duties tests. There’s no question that true clarifications would be welcome and of great benefit to all covered employers. However, whatever the clarifications are, to the extent they leave or create any new tests or ambiguities, it may take years to gain a full and clear understanding, since interpretations will play out as the Pennsylvania courts hear and decide cases going forward. Our fingers are crossed, of course, while we hope for more insight about these planned clarifications soon.

Stay tuned for more, as the DOLI anticipates releasing the proposed changes to the regulations for public comment in March.

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