Increase the Pennsylvania Minimum Wage or the Overtime Salary Threshold?

Spilman Thomas & Battle, PLLC
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Spilman Thomas & Battle, PLLC

Employers and employees are witnessing a struggle between the administration of Governor Tom Wolf, the Legislature and Pennsylvania employers over efforts to modernize the rules governing overtime and/or increase the Commonwealth's current minimum wage of $7.25 per hour. Most Pennsylvania employers are required to meet the requirements of both federal and state wage laws, and employees are entitled to receive the benefits of whichever law is the most favorable. The outcome of that struggle should be known shortly. 
 
Pennsylvania has not joined the efforts of many others states, including its immediate neighbors, to increase the minimum wage beyond the federal minimum wage of $7.25 per hour prescribed by the Fair Labor Standards Act ("FLSA"). Pennsylvania additionally has resisted calls to modernize its overtime pay rules to increase the salary threshold required to qualify for an overtime exemption and to revise its other overtime exemption rules to approximate the federal model. For example, Pennsylvania's overtime salary threshold is still $250 per week and the Commonwealth did not mimic the 2004 federal rulemaking under the FLSA that adopted a standard "duties" test. It appears the longstanding Pennsylvania inaction is about to end, although likely on only one front.
 
The Pennsylvania Department of Labor and Industry proposed new regulations in 2018 to increase the minimum salary threshold to qualify for the overtime exemption provided under the Pennsylvania Minimum Wage Act and to change the existing overtime "duties" test. The Department's Final Rule, submitted on October 17, 2019, would raise the salary minimum incrementally over three years to $875 a week ($45,500 annually) with automatic adjustments every three years thereafter based on the 10th percentile of all Pennsylvania workers who work in salary exempt positions. By comparison, the new federal overtime rules, slated to go into effect on January 1, 2020, only raise the salary threshold to $684 a week ($35,568 annually), with no automatic adjustments. The Department estimates the effect of the changes proposed to Pennsylvania's overtime salary threshold will increase the number of workers entitled to receive overtime pay by an additional 82,000 workers by 2022.
 
Both chambers of the Pennsylvania Legislature formally disapproved the final overtime regulation. However, the Pennsylvania Senate, right before the Thanksgiving break, sent a bill to the House of Representatives to increase the Commonwealth's minimum wage in increments over the next two years from $7.25 to $9.50 an hour. The proposed increase represented a compromise reached between Governor Wolf, the Pennsylvania Chamber of Business and Industry and legislators to withdraw the changes proposed to the regulatory overtime rules in exchange for an increase in the minimum wage. Whether the House will agree to the minimum wage increase remains unclear. Governor Wolf announced on December 6 the House has until the end of December to pass the minimum wage increase. In the event the House fails to meet the deadline, the Governor has indicated he will ask the state's regulatory review commission to approve the final overtime rule in January 2020.
 
What will it be: an increase of Pennsylvania's minimum wage or of the salary threshold for the overtime exemption? Stay tuned.

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