On Jan. 1, 2020, the U.S. Department of Labor’s (DOL) final overtime rule went into effect. Since the rule became effective, any individual earning less than the new salary threshold equivalent to $35,568 per year for a non-exempt, full-time worker is eligible for overtime pay. However, as the federal law is the minimum requirement, states can have higher thresholds. The following is additional information on a specific note regarding Pennsylvania.

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Pennsylvania’s new overtime rules.

Pennsylvania's Department of Labor & Industry (L&I) submitted a final regulation to modernize its overtime rules in October 2019. The regulation extends overtime benefits to 143,000 workers and improves overtime protections for an estimated 251,000. In total, the revised overtime rules are expected to benefit 394,000 employees.

The new rules will raise the salary threshold in the state to $875 per week, and $45,500 annually in the course of over two years. This rule implements a strategy to increase this threshold using a phase-in approach comprised of three steps beginning in 2020:

  1. 2020 - $684 per week; $35,568 annually
  2. 2021 - $780 per week; $40,560 annually
  3. 2022 - $875 per week; $45,500 annually

The salary threshold will automatically adjust every three years beginning in 2023.

The new rule also specifies that the responsibilities for executive, administrative and professional employees are more closely aligned with the federal regulation, making it easier for managers to recognize whether a worker qualifies for overtime.

What’s the difference from the Federal level?

Let’s recap what was highlighted above. On the federal level, the “standard salary level” was raised from $455 per week to $684 which is equivalent to $35,568 per year for a full-year worker.

Under this new rule, the DOL is:

  • “raising the total annual compensation level for "highly compensated employees (HCE)" from the currently enforced level of $100,000 to $107,432 per year;
  • allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level, in recognition of evolving pay practices; and
  • revising the special salary levels for workers in U.S. territories and in the motion picture industry.”

The DOL hopes this rule will allow eligibility for overtime pay to be granted to 1.3 million American workers under the Fair Labor Standards Act (FLSA).

For more information on this rule, and whether or not your business will be affected, read our previous blog here.

What this means for Pennsylvania employers.

If you are an employer in Pennsylvania, you are required to adhere to the overtime provisions of the state’s minimum wage act and regulations. This means you must pay employees $7.25 per hour and compensate workers one and a half times their regular rate of pay if they exceed 40 hours worked in a workweek unless the individual is exempt from these specifications.

Employers are required to follow the regulations in Pennsylvania even if those guidelines are more restrictive for employers than the current federal requirement. Enforcement of state overtime requirements, such as that in Pennsylvania, is not affected by the federal law and the new federal regulations. However:

  • Employers in Pennsylvania will need to comply with both the new federal overtime rules and Pennsylvania's Minimum Wage Act overtime provisions.
  • Employers in Pennsylvania are advised to follow the rule that delivers the greater benefit for the employee where the two rules vary.

For more information on Pennsylvania’s Overtime Rules, read here.

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Disclaimer: Please note that this is not all-inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding the specific application of the information to your own plan.