Pennsylvania Wage and Hour Updates: (1) New Overtime Pay Regulation No Longer in Effect and (2) Mandatory Security Checks Are Compensable as Hours Worked

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There are two recent and important wage and hour developments of which Pennsylvania employers need to be aware. Unfortunately, most employers have not been planning for either of these new developments.

(1) NEW OVERTIME PAY REGULATION NO LONGER IN EFFECT

First, effective September 7, 2021, (2021 Act 70, dated July 9, 2021), the Pennsylvania General Assembly repealed the state regulation that had amended definitions for the executive, administrative and professional (EAP) exemptions from minimum wage and overtime obligations. Under the now repealed regulation, the minimum threshold salary to meet the EAP exemptions in Pennsylvania had been raised to match the Federal threshold of $684 per week ($35,568 annually) effective October 3, 2020, and was scheduled to increase to $780 weekly ($40,560 annually) effective October 3, 2021 and $875 weekly ($45,500 annually) effective October 3, 2022, with further increases in future years. Beginning in October 2021, these increases would have placed the Pennsylvania threshold higher than the Federal threshold which remains at $684 weekly.

Apparently, our state legislators determined that it was no longer desirable to allow the Pennsylvania weekly salary requirements to exceed the Federal level in October 2021. To accomplish this task, the General Assembly might have simply eliminated the higher salary threshold from the regulation or restored the very low thresholds that were in the regulation since 1977 ($8,060 per year under the “long test” for executive and administrative workers and $8,840 per year for professional employees, for example). But, the General Assembly did much more than this – the new law (2021 Act 70) repealed the entire EAP regulation, stating only:

SECTION 2215.1. ABROGATION OF DEPARTMENT REGULATIONS.--THE REGULATIONS AT 34 PA. CODE §§ 231.82 (RELATING TO EXECUTIVE) 231.83 (RELATING TO ADMINISTRATIVE) AND 231.84 (RELATING TO PROFESSIONAL) ARE ABROGATED

This means that Pennsylvania now has no regulatory guidance at all setting forth definitions or salary requirements for EAP exemptions in Pennsylvania. It does not mean, however, that there are no exemptions. In fact, the state statute remains on the books – the Pennsylvania Minimum Wage Act, which still authorizes but does not define EAP exemptions. The Pennsylvania Minimum Wage Act (PMWA) (43 PS §333.105), enacted in 1968, states that employees in EAP capacities are exempt from minimum wage and overtime requirements if they are employed:

(5) In a bona fide executive, administrative, or professional capacity (including any employe employed in the capacity of academic administrative personnel or teacher in elementary or secondary schools) or in the capacity of outside salesman (as such terms are defined and delimited from time to time by regulations of the secretary, except that an employe of a retail or service establishment shall not be excluded from the definition of employe employed in a bona fide executive or administrative capacity because of the number of hours in his or her workweek which he or she devotes to activities not directly or closely related to the performance of executive administrative activities, if less than forty percent of his or her hours worked in the workweek are devoted to such activities)

43 PS §333.105.

It is not clear how the Pennsylvania Supreme Court would interpret the recent actions of the General Assembly. In abrogating the new regulation, did our legislators mean that Pennsylvania should follow the Fair Labor Standards Act (FLSA) and its regulations and precedent, as some commentators have suggested? Or did they mean that Pennsylvania should treat its EAP employees differently, as others have suggested? Is there any minimum salary required at all for EAP employees? Is the minimum salary now at the level it was prior to the newly abrogated regulation ($250 weekly) or is it at the level established by the FLSA regulations in 1968 when the legislature adopted the PMWA ($150 weekly)? Will Pennsylvania recognize the FLSA’s exceptions for teachers, lawyers, doctors and academic administrators, for example? Under the FLSA regulations, these employees may qualify for the exemption without meeting the minimum salary threshold required for other EAP exemptions.

Recent decisions by the Pennsylvania Supreme Court suggest that the Court might decide that the PMWA does not always follow the FLSA, especially where a difference would benefit employees. See, for example, In re Amazon, No. EAP 2019 (July 21, 2021) (PMWA requires payment for security checks at worksite even though FLSA does not) (further described below); Chevalier v. General Nutrition Centers, 220 A3d. 1038 (Pa. 2019) (PMWA does not allow use of the “flexible workweek” to compute overtime wages, even though FLSA does allow); Bayada Nurses v. Commonwealth Department of Labor and Industry, 8 A.3d 866 (Pa. 2010) (PMWA limits the exception to exemption from minimum wage and overtime for domestic workers paid directly by a householder who employs them even though FLSA provides a broader exception to the exemption).

In any case, it is likely that there will be litigation regarding the EAP definitions unless the legislature acts quickly to provide some guidance.

(2) MANDATORY SECURITY CHECKS ARE COMPENSABLE AS HOURS WORKED

In the second recent wage and hour development, the Pennsylvania Supreme Court declined to follow U.S. Supreme Court precedent interpreting the FLSA and instead found, on July 21, 2021, that time employees spent on an employer’s premises waiting for and undergoing mandatory security screenings is always compensable as hours worked within the meaning of the PMWA even if the amount of time is small. In re: Amazon.com, Inc., No. EAP 2019 (PA. July 21, 2021).

The Pennsylvania Supreme Court answered two certified questions from the United States Court of Appeals for the Sixth Circuit, which is adjudicating multidistrict wage and hour litigation involving several Amazon fulfillment centers, including at least one location in Pennsylvania. A class of employees sought compensation for time spent undergoing required, routine security checks. After clocking out at the end of their shifts, employees were required to undergo antitheft security screenings, which included metal detectors, searches of bags and other personal items, and a secondary screening process if the metal detector’s alarm sounded.

The Pennsylvania Supreme Court noted that the United States Supreme Court had interpreted the FLSA involving the same Amazon employees and the same security screenings and had found that the time was not compensable under the FLSA and the Federal Portal-to-Portal Act (PTPA), which amended the FLSA. Integrity Staffing Solutions v. Busk, 574 U.S. 27 (2014). The PTPA amended the FLSA to make it clear that “activities which are preliminary to” a worker’s principal activity and activities which occur prior to the time an employee commences work or subsequent to the time the employee ceases work are not compensable. 29 U.S.C. §254(a). The Busk Court explained that an activity, even if required by the employer, does not count as compensable time worked under the Federal FLSA, as amended by the PTPA, unless the activity is an “intrinsic element” of the employee’s principal duties, and “one with which the employee cannot dispense if he is to perform his principal duties.” 574 U.S. at 33. The Busk Court concluded that the routine security screenings at the Amazon fulfillment centers were not intrinsic to the warehouse packing and shipping work the employees performed, and therefore not compensable under the FLSA. Id. at 35.

In addition, the Pennsylvania Supreme Court noted that the Pennsylvania General Assembly had not amended the PMWA in the manner the PTPA amended the FLSA. “Hours worked” is defined by Pennsylvania regulations to include “time during which an employee is required by the employer to be on the premises of the employer, to be on duty or to be at the prescribed work place, … and provided further, that time spent on the premises of the employer for the convenience of the employee shall be excluded.” 34 Pa. Code §231.1.

Thus, the Pennsylvania Supreme Court concluded that this state regulation clearly evidenced that the time spent at mandatory security checks on the employer’s premises must be compensated. The Court “reaffirmed the principle that the PMWA manifests this Commonwealth’s strong public policy protecting an employee’s right to be adequately compensated for all hours for which they work.” (Slip Op. at 14, citing Chevalier, 220 A.3d at 1055). The Court noted that the FLSA, by its own terms, specifically permits states to enact more beneficial wage and hour laws than provided by the FLSA. Slip. Op. at 15. Thus, the Pennsylvania courts are not bound by decisions interpreting the FLSA. Pennsylvania never adopted the PTPA provision which states that activities that occur subsequent to the time the employee ceases work are not compensable. “Indeed, we perceive the legislature’s decision not to adopt the PTPA as wholly consistent with that body’s clear and unequivocal policy statement statutorily expressed in the PMWA, that its overarching purpose is to address the evils of unreasonable and unfair wages and to ameliorate employer practices which serve to artificially depress those wages.” Slip Op. at 16.

Similarly, the Pennsylvania Supreme Court in Amazon concluded that it was not bound to follow the judicially created de minimis exception to the FLSA, which suggests that small amounts of time worked are not compensable. The Court again noted that the de minimis exception would conflict with the purpose of the PMWA, which is “to maintain the economic well-being of our Commonwealth’s workforce by ensuring that each and every Pennsylvania worker is paid for all time he or she is required to expend by an employer for its own purposes.” Slip. Op. at 28.

TAKEAWAYS. First, Pennsylvania employers should review their payroll practices to ensure that nonexempt employees are paid for all time they are required to be at the workplace or otherwise performing tasks for their employer, including post-shift security screens. Second, Pennsylvania employers do not need to raise salaries for exempt employees already making at least $684 per week. Finally, Pennsylvania employers should not assume that the Pennsylvania Supreme Court will interpret the PMWA consistent with well-accepted precedent interpreting the FLSA unless similar provisions are clearly provided for by the PMWA.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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