Pennsylvania’s New Overtime Rule Goes into Effect

By Katie Herrmann

A final rule went into effect on October 3, 2020, amending Pennsylvania’s laws relating to overtime pay. The Pennsylvania Department of Labor and Industry drafted the new rule to update the salary threshold for the first time since 1977 to reflect current wages paid to Pennsylvania employees working in specific occupations.

The overtime rules set a minimum salary so that any employees employed in a bona fide executive, administrative, or professional capacity who make more than the threshold amount will not be eligible for overtime. However, the new rule raises the previous minimum pay amount to match that of the new federal standard, and the overtime rules in Pennsylvania will become even more generous over the next couple of years. This change is intended to protect those employees who have been arbitrarily exempted from overtime pay and required to work excessive overtime hours without additional compensation.

The rule is modeled after the standard that took effect in January of this year in which the Trump administration increased the eligibility threshold from $23,660 to $35,568 in annual salary. In Pennsylvania, the salary threshold will increase with each year according to the following breakdown:

• $684 per week, $35,568 annually, on October 3, 2020
• $780 per week, $40,560 annually on October 3, 2021
• $875 per week, $45,500 annually on October 3, 2022

Those who are eligible to receive overtime include hourly employees who work more than 40 hours a week, most salaried employees who work more than 40 hours per week and earn less than the salary threshold regardless of their job duties, and most salaried employees who do NOT perform executive, administrative, or professional duties regardless of how much they are paid. 

Those who are not eligible to receive overtime include salaried employees who perform executive, administrative, or professional duties and make more than the salary threshold per year. This exemption is the result of the Pennsylvania Minimum Wage Act which disallows overtime to those employees who meet certain tests regarding their salary and their job duties. As part of the Act, being a salaried worker does not automatically qualify an employee for one of these exemptions, and job titles do not determine exempt status.

In a news release regarding the new rule, State Department of Labor & Industry Secretary Jerry Oleksiak said the updated regulation will expand eligibility for overtime to 143,000 people and strengthen overtime protections for up to 251,000 or more. According to the Economics Policy Institute, 63% of those affected by the new regulations are women and 16% are minorities.

Through the lens of the economic fallout from the coronavirus pandemic, however, this move comes at a time where many employers are struggling to keep their businesses open. Opponents of the rule including the Pennsylvania Chamber of Business and Industry and the United Way have called this new rule harmful because it may potentially force employers with thin margins to lay off employees or slash benefits and wages. According to the Pennsylvania Chamber of Business and Industry President Gene Barr, “Employers unable to absorb additional costs will be forced to shift salaried employees into hourly positions so that hours can be tracked and capped to avoid overtime costs.  Employees may technically be eligible for overtime pay, yet they lose the flexibility and predictability that comes with earning a salary with no guarantee of additional wages.” Similarly, employers may increase the salary of their employees to match the minimum threshold and avoid overtime payment. Either way, this new regulation will affect Pennsylvania employers and employees alike, and will certainly be a point of contention as businesses struggle to navigate the economic realities facing the country today.