Shortly after the U.S. Department of Labor’s new overtime rule was finalized, the Pennsylvania Department of Labor and Industry (L&I) followed suit and finalized its own proposed overtime rule. Regulation 12-106 was set to exceed the new federal rule regarding the minimum salary to be paid to employees who are exempt from overtime. The new federal threshold of $684 per week ($35,568 per year) goes into effect on January 1, 2020. Regulation 12-106 would have phased Pennsylvanians in executive, administrative, and professional roles into a new minimum salary requirement of $875 per week ($45,500 per year) by 2022. The threshold would have adjusted automatically every three years beginning in 2023.

The Independent Regulatory Review Commission was set to consider Regulation 12-206 yesterday, November 21, 2019. But about an hour before the meeting was to begin, the regulation was withdrawn. L&I advised in a brief letter that “legislation could be passed before the end of this year that would invalidate portions of this regulation.”

Although not explicitly stated, the legislation referred to is very likely Senate Bill 79, which passed the Pennsylvania Senate, November 20, 2019, in a 42-7 vote and is headed for the House of Representatives. The bill – perhaps a compromise – would amend the Pennsylvania Minimum Wage Act to:

• Specify that state minimum wage and overtime rules are to be applied in accordance with those of the federal Fair Labor Standards Act (FLSA) unless state standards are higher.
• Add the FLSA’s exemptions for outside sales employees, highly compensated employees, computer systems analysts, computer programmers, software engineers, or other similarly skilled workers.
• Allow employers to use nondiscretionary bonuses, incentives, and commissions paid at least annually to count towards up to 10 percent of salary- or fee-based compensation thresholds, and to set their own non-calendar year annual period if in writing in advance.
• Prohibit employers from deducting processing fees from tips paid by credit card.
• Increase Pennsylvania’s minimum wage to:
  • $8.00 an hour beginning July 1, 2020
  • $8.50 an hour beginning January 1, 2021
  • $9.00 an hour by July 1, 2021
  • $9.50 an hour beginning January 1, 2022

Aligning Pennsylvania’s overtime exemptions with federal law would be a positive for business interests and would remove substantial risk and compliance challenges employers in the Commonwealth face today. Whether the Republican-controlled House will approve the bill is, of course, yet to be seen, but Pennsylvania employers would be wise to anticipate state-wide wage rule changes in the near future. These changes would likely include increases in minimum wage requirements, new overtime exemptions, and an increase in the minimum salary required for overtime exempt employees.