PA’s Long-Awaited Overtime Rule Change Takes Effect

FULL ALERT

After a lengthy regulatory process, Pennsylvania’s overtime rule change finally took effect on October 3, 2020. As we shared in 2018 when the regulations were initially proposed, the new rule raises the minimum salary threshold and brings the definition of executive, administrative, and professional (EAP) in line with the requirements under the Fair Labor Standards Act (FLSA). 

Amending the Pennsylvania Minimum Wage Act, the state Department of Labor & Industry established a minimum salary threshold to qualify for the exemption, which will be phased in over the next three years as follows.

• October 3, 2020: $684 per week, $35,568 annually (this matches the federal requirement, which went into effect January 1, 2020)
• October 3, 2021: $780 per week, $40,560 annually
• October 3, 2022: $875 per week, $45,500 annually

In 2023, the salary threshold will adjust based on the average wages of exempt occupations in the state. 

Although the latest amendments bring the state requirements closer to the federal overtime regulations, there are still key differences between the two:

• Pennsylvania does not recognize the highly compensated employee exemption. Unlike federal law, which provides that certain employees making over $107,432 are exempt from overtime requirements, in Pennsylvania employees at or above that salary level may still earn overtime if their position/job duties do not fall within the EAP definition.
• Pennsylvania also does not have an exemption for computer employees.
• The exemption for outside sales employees remains different in Pennsylvania.
• The extensive regulations that exist under the FLSA defining what it means to be paid on a salary basis and creating exceptions to the salary basis rules do not exist in Pennsylvania, so reliance on federal regulations may be risky.

The Department of Labor & Industry’s Employer Fact Sheet outlines key changes and highlights major differences between state and federal law. Where differences exist between federal and state law, employers must follow the provision that is most favorable to the employee because the federal law sets the floor on employee protections and state laws can impose additional requirements on employers.

Attorneys in Ballard Spahr’s Labor and Employment Group regularly advise employers on wage and hour compliance issues and represent employers in wage and hour audits conducted by state and federal agencies, internal classification audits, and litigation related to classification issues.

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