ALERT! PA Increases White Collar Exemption Salary Thresholds

Jason E. Reisman

Finally, the Pennsylvania Department of Labor and Industry (“Department”) formalized its leap to modernize and streamline its regulation governing the executive, administrative, and professional (“EAP”) exemptions (and the outside sales exemption) from the minimum wage and overtime requirements of the Pennsylvania Minimum Wage Act. To confirm, yes, the Commonwealth is leaving the U.S. Department of Labor’s recent rule in the dust! See our last blog post on this from February here, as well as the ones from July 2018 and January 2018.

Although the Department took great pains to better—but not fully—align its requirements with those under the Fair Labor Standards Act (“FLSA”), the hallmarks of this new regulation are the new salary threshold increases:

      • $35,568 ($684 per week) effective 10/3/2020 (which matches the FLSA threshold that was effective 1/1/2020—see our prior post here);
      • $40,560 ($780 per week) effective 10/3/2021;
      • $45,500 ($875 per week) effective 10/3/2022; and
      • On 10/3/2023, and every third year thereafter, the minimum salary will change to match the 10th percentile of wages for Pennsylvania workers who work in exempt EAP positions.

So, employers in the Commonwealth have a year to evaluate options and develop a strategy to manage the increase to $780 per week next October. Don’t wait (too long)! It will be here before you know it—and, there’s no real end in sight, as the salary threshold is expected to continue to grow in the years to come.

To match the new FLSA regulation, the Department is allowing Pennsylvania employers to satisfy up to 10 percent of the minimum salary amount with the payment of nondiscretionary bonuses, incentives, and commissions that are paid on an annual or more frequent basis.

As for the effort to align Pennsylvania’s job duties tests and other exemption requirements with those under the FLSA, let’s just say that the Department gave it the “old college try.” While it cleaned up a few things (and matched the initial salary threshold and adopted the 10 percent nondiscretionary payment concept), there remain several glaring discrepancies—for example, unlike the FLSA, the Pennsylvania regulation still does not:

      • recognize a computer professional exemption;
      • recognize the highly compensated employee exemption;
      • align the outside sales exemption with the FLSA counterpart; or
      • exempt teachers, physicians, and lawyers from the salary requirements.

In the published regulation, the Department admits that it “has not adopted all Federal definitions” but states that it “does look to Federal law for guidance in interpreting its regulations.” For good measure and a ray of hope: “The Department will continue to review Federal regulations and may address any additional inconsistencies in future rulemakings.” Hmm—I’m not sure I’d hold my breath. This process has been nothing short of exhausting and time consuming. With the differences that remain, Pennsylvania employers are still subject to two different standards, increasing risk that employees and their lawyers find issues to pursue. Although not ideal for employers operating in the Commonwealth, Pennsylvania remains a solid distance behind the other trailblazing states, such as California and New York!

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