Posted October 5, 2020
Certain office workers may no longer be exempt from overtime rules following the enactment of a new Pennsylvania rule promulgated by the commonwealth’s Department of Labor & Industry that increases the salary threshold for over time exemption. Effective today, the Department amended the Minimum Wage Act to update salary thresholds that trigger overtime pay requirements for executive, administrative, and professional occupations. Pennsylvania’s new overtime rules will align more closely with the federal overtime regulation, which will simplify the process for employers to determine which workers qualify for overtime pay. As before, paying an employee a salary does not automatically make the employee exempt from overtime; the employee must engage in specific duties as well.
The increased annual salary threshold will phase in over three years and will reach $45,500, or $875 per week, on October 3, 2022. As of today, the minimum salary for exemption from overtime matches that of the federal rule, which is $35,568, or $684 per week. The current federal minimum became effective January 1, 2020. The minimum annual salary threshold for Pennsylvania will become $40,560, or $780 per week, on October 3, 2021. Starting in 2023, the salary threshold will adjust automatically every three years.
Employers should also know that Pennsylvania’s Overtime Rules allow up to 10% of the salary threshold to be satisfied by nondiscretionary bonuses, incentives, and commissions, paid annually, quarterly or more frequently. This is aligned with the federal rules that went into effect on January 1, 2020 as well. Two key differences between the federal rules and Pennsylvania rules are that Pennsylvania does not recognize overtime exemptions for computer workers or for highly-compensated employees (those earning $107,432 or more annually), unless such workers otherwise qualify for an exemption under Pennsylvania law. Furthermore, the federal rule does not contain an auto-adjusting salary increase, and will be adjusted.
In addition to the salary threshold update, Pennsylvania also updated the duties tests to align with the U.S. Department of Labor’s duties test, making it easier for employers to comply with the law and for employees to know if they should be classified as an exempt or non-exempt executive, administrative, or professional employee. If the employee meets all requirements of the duties test for his or her field, and makes more than the annual salary threshold, then that employee is exempt from overtime pay under Pennsylvania law.
Pennsylvania employers must comply with all overtime requirements of Pennsylvania’s Minimum Wage Act and regulations. Find answers to FAQs regarding general wage and hour questions for Pennsylvania employers and workers here.
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