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Pennsylvania Moves Closer to Increasing the Minimum Salary Threshold under the Minimum Wage Act

As Published in the August, 2018 Issue of the PELRAS Newsletter

Published on: Fri 10th Aug, 2018 By: Martin Glynn

You may have heard recently that the Pennsylvania Department of Labor has released proposed rules to raise the state minimum salary threshold for the “white collar exemptions” under the Pennsylvania Minimum Wage Act. According to the Pennsylvania Department of Labor’s announcement, the changes are expected to result in 460,000 more Pennsylvania employees, or roughly seven percent more of the workforce, being eligible for overtime pay. Municipalities should know, however, that the Pennsylvania Minimum Wage Act has been interpreted to not apply to Pennsylvania local governments. Therefore, these proposed changes should not impact your municipality, and there has been no indication that the U.S. Department of Labor (“U.S. DOL”) will take action soon to raise the federal white collar exemption salary threshold, which would apply to Pennsylvania local governments if raised. The remainder of this article explains the new proposed State changes, in the event they would be applied to local governments in the future, as well as the status of the changes contemplated at the federal level by the U.S. DOL in 2016.

Currently, the Pennsylvania salary threshold for overtime exemption is $23,600 annually, which is only slightly less than the current federal threshold of $23,660. As with the federal Fair Labor Standards Act (“FLSA”), the Pennsylvania white collar exemption includes workers employed in “executive, administrative, and professional” capacities, which are defined by state statute. If an employee makes a set salary that falls below the exemption threshold, they are non-exempt and thus eligible for overtime. In 2016, the U.S. Department of Labor (“U.S. DOL”) under the Obama administration proposed doubling the minimum salary threshold under the FLSA to $47,476 annually, up from $23,660 annually. Prior to implementation, however, a federal court in Texas granted an injunction that halted the increase and the U.S. DOL under the Trump administration has not since further pursued an increase.

Now, the Pennsylvania Department of Labor is proposing to raise the minimum salary for exempt employees to a level that would exceed the current federal threshold, over a span of three years. As currently proposed, the state would increase the exemption threshold to $610 per week ($31,720 annually) upon the rule’s effective date, which is yet to be determined but is expected to be sometime in 2019. The Pennsylvania DOL further proposes to increase the threshold to $766 per week ($39,832 annually) after one year and to $921 per week ($47,892 annually) after two years. In other words, the rule would more than double the current salary threshold for the exemption in a three year period. Additionally, in the third year, and then every three years after that, the rule would provide for a “reset” of the threshold to match the “30th percentile of weekly earnings of full-time non-hourly workers in the Department of Labor’s Northeast Census region.” As stated above however, we are currently advising Pennsylvania municipalities that the proposed changes do not apply to their employees because the Pennsylvania Minimum Wage Act has been interpreted to not apply to local governments.

We will update you on any changes to the federal or state salary thresholds that require action by Pennsylvania municipalities. Currently, there are no proposed changes at the federal level, and we believe the proposed changes at the State level do not apply to local government employees. Employers should consult with employment counsel with questions about exempt status for particular job classifications and the applicable salary thresholds.