As many will recall, the U.S. Department of Labor issued regulations in May 2016 that would have increased dramatically the minimum salary requirements for the Fair Labor Standards Act’s “white-collar” overtime exemptions. The 2016 FLSA regulations would have more than doubled the minimum weekly salary requirement for most white-collar overtime exemptions from $455 to $913 and contained a number of additional provisions, the vast majority of which were not viewed favorably by employers.
In November 2016, mere days before those FLSA regulations were set to become law, a federal judge issued an injunction blocking those regulations from taking effect. Since then, the possibility of those regulations ever taking effect has diminished substantially.
Now, it appears that the changes the 2016 FLSA regulations promised may become a reality for Pennsylvania employers. Yesterday, Governor Wolf announced that the Pennsylvania Department of Labor and Industry will propose new regulations under the Pennsylvania Minimum Wage Act that will increase the minimum salary requirement for the white-collar overtime exemptions under this state law.
The PMWA is the state-law equivalent of the FLSA. The PMWA and FLSA both place minimum wage and overtime pay obligations on Pennsylvania employers. While the laws’ requirements are similar, they are not identical. Employers in Pennsylvania must meet the requirements of both laws to ensure compliance. In areas where one law is more favorable to employees than the other, employers must comply with the more pro-employee requirements to avoid liability for unpaid minimum wages or overtime pay.
Governor Wolf announced that the proposed PMWA regulations will raise the salary level to determine overtime eligibility for most white-collar workers from the current FLSA minimum of $23,660 (i.e., $455 per week) to $31,720 (i.e., $610 per week) on January 1, 2020. If the proposed regulations ultimately take effect, the annual salary threshold will increase to $39,832 (i.e., $766 per week) on January 1, 2021, followed by $47,892 (i.e., $921 per week) in 2022. Starting in 2022, the salary threshold will update automatically every three years. (The terms of such automatic increases have not yet been released.)
In addition, unlike the 2016 FLSA regulations, Governor Wolf announced that the new PMWA regulations will “clarify” the duties tests for the white-collar exemptions. We can only assume that such “clarifications” when issued will not be favorable for employers and will make even more currently exempt employees now eligible for overtime.
The Department of Labor and Industry anticipates releasing the proposed regulations for public comment in March 2018.
For Pennsylvania employers, all of this will feel very familiar. Should the proposed regulations become final and take effect, employers in Pennsylvania will need to take the following steps:
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Identify those employees currently treated as exempt from overtime pay and determine whether their salaries will meet the new minimum salary thresholds.
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For those employees currently treated as exempt who earn less than the new minimum salary thresholds, consider whether to increase their salaries to meet the new salary requirements or convert the employees to non-exempt status and pay them for overtime worked.
Of course, Governor Wolf announced only that proposed regulations containing these changes will be coming in March. There is no guarantee that the proposed regulations will become final in the same or similar form, and, even if they do, legal challenges may await. The PA Chamber of Business and Industry already has announced its strong opposition to the proposed changes. There is also a gubernatorial election in November 2018 that may play a large role in the ultimate fate of these proposed regulations.
Whether and to what extent these changes will become law in 2020 remains to be seen. We will provide updates on the proposed regulations as the situation warrants. In the meantime, to quote the late great Yogi Berra, it’s déjà vu all over again.
