New overtime rules in the federal Fair Labor Standards Act (FLSA) take effect nationwide Wednesday, January 1, 2020. Pennsylvania employers must understand the new rules and their obligation to comply with Pennsylvania’s Minimum Wage Act and regulations.

The update to federal regulation includes:

  • Raising the “standard salary level” from $455 to $684 per week (equivalent to $35,568 per year for a full-year worker); and
  • 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.

How the New Overtime Rules Affect PA Employers

Generally, an employee is entitled to minimum wage and overtime pay (at time and a half) for all hours worked over 40 hours per week. However, overtime is not required to be paid for “any employee engaged in a bona-fide executive, administrative, or professional capacity” who is paid on a salaried basis instead of an hourly wage and meets the minimum salary threshold defined in federal and state regulations.

In October 2020, the Pennsylvania Department of Labor & Industry increased the minimum salary threshold to qualify for the overtime exemption, which will continue to rise annually over the next three years and then every three years thereafter. The threshold specifics:

  • October 3, 2020: $684 per week, $35,568 annually
  • October 3, 2021: $780 per week, $40,560 annually
  • October 3, 2022: $875 per week, $45,500 annually
  • Beginning in 2023, the salary threshold will adjust based on the average wages of exempt occupations in the state.

New FLSA Overtime Rules vs. PA Minimum Wage Act

There are three key differences between the PA Minimum Wage Act and the New FLSA rules.

  • First, Pennsylvania does not recognize the highly compensated employee exemption which allows an employer to avoid paying overtime if an employee earns a certain salary. The revised federal regulations set a threshold for this exemption at $107,432 annually.
  • Second, the Federal Rules do not require overtime for certain computer employees. Pennsylvania law does not contain an exemption to overtime for these employees. Accordingly, overtime must be paid to computer employees, if they are unable to qualify for an exemption recognized by Pennsylvania law.
  • Lastly, Pennsylvania’s rule as set forth above increased the salary thresholds for exemptions from overtime. Pennsylvania’s salary threshold for 2020 is similar to the federal standards. However, beginning in 2021 the salary thresholds differ, and employers must follow Pennsylvania’s regulations even if these rules are more stringent for employers than the revised federal requirement.

Key Takeaways

  • Pennsylvania employers will need to follow both the new federal overtime rules and the overtime requirements of Pennsylvania’s Minimum Wage Act.
  • Pennsylvania employers must follow the rule that provides the greater benefit to the employee where there are differences between the two laws.

Easily Navigate the New 2020 Overtime Rules for Salaried Employees in PA with MBM Law.

The attorneys of Maiello Brungo & Maiello’s Human Resources Compliance & Strategic Counseling Group are ready to help Pennsylvania employers navigate compliance with the new overtime rules. Contact us today at 412-242-4400 or info@mbm-law.net.

For more information, check out the PA Department of Labor’s webpage dedicated to Overtime Rules, here: https://www.dli.pa.gov/Individuals/Labor-Management-Relations/llc/Pages/Overtime-Rules.aspx

Michel L. Brungo
Michael L. Brungo

Michael Brungo is a partner with MBM and has over 35 years of experience working with businesses, corporations, and public entities with their personnel and employment issues. He is available to help with any type of employment‐related legal matter.