Pennsylvania has raised the threshold for determining whether employees are eligible for overtime pay – and the threshold is scheduled to continue to rise multiple times, automatically, in the years to come. On October 3, 2020, the Pennsylvania Department of Labor & Industry (L&I) issued a final rule concerning overtime pay requirements under the Pennsylvania Minimum Wage Act (PMWA) for workers in the Commonwealth. You can find the final rule here. According to L&I Secretary Jerry Oleksiak, the final rule marks the first change to the Commonwealth’s overtime structure “in more than four decades.” More employees will now be eligible for overtime pay due to this rule.
What is the final rule?
The U.S. Department of Labor (DOL) modified its overtime pay requirements under the Fair Labor Standards Act (FLSA), effective January 1, 2020. However, Pennsylvania is going beyond the recent federal changes, and determined the below overtime thresholds for overtime eligibility to increase in three steps:
- $684 per week, $35,568 annually (the federal threshold) on October 3, 2020;
- $780 per week, $40,560 annually on October 3, 2021; and
- $875 per week, $45,500 annually on October 3, 2022.
Unless an exemption applies, any Pennsylvania employee whose base earnings fall below the thresholds is entitled to overtime pay. In addition, starting October 3, 2023, the salary threshold will automatically increase every three years.
When are these new changes effective?
The law and initial change became effective October 3, 2020.
What does this mean for employers?
- DISTINGUISH – The FLSA and PMWA are not the same in all respects. In Pennsylvania, employers will have to comply with the FLSA and the PMWA, when determining employee overtime eligibility. Any differences in either rules’ application, must be resolved in favor of whichever law is more favorable to the employee.
- REASSESS – As mentioned in our earlier article regarding DOL’s overtime changes, employers should reassess the duties, pay structures and earnings of all their employees. Though employers have about a year to go before the next threshold increase, it behooves employers to get ready now.
- BUDGET – After distinguishing and reassessing, employers should budget modify payroll calculations to endure compliance with the new thresholds and budget accordingly. In light of the onslaught of COVID-19, and presumed increases in costs and dips in revenue, advanced preparation is key.
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