Complying with the Department of Labor’s Proposed Overtime Regulations

Q.  I heard that the United States Department of Labor is planning to raise the salary threshold for exempt status again. What is the new rule and when does my company have to comply?

A.  On March 7, the U.S. Department of Labor issued its long-anticipated proposed rule that would expand overtime eligibility under the Fair Labor Standards Act (FLSA) to include a significant number of additional workers. The proposal will be open to public comment for 60 days, with the final rule set to take effect around January 1, 2020.

Under current regulations, in effect since 2004, employees with a salary below $455 per week, or $23,660 annually, are nonexempt and must receive overtime pay for hours worked over 40 hours per week, regardless of whether their duties fall within one of the FLSA exemptions. The new rule would raise the salary threshold from $455 to $679 per week, or $35,308 per year, meaning that employees who earn less than those thresholds will be automatically nonexempt and eligible for overtime on the effective date. Employees earning salaries in excess of either threshold may still be nonexempt and eligible for overtime based on their job duties.

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POTENTIAL CHANGES ON THE HORIZON FOR PENNSYLVANIA WAGE AND HOUR LAW

Q.  Have there been any recent changes to the overtime pay rules that we have to be concerned about?

A.  Currently, under both federal and Pennsylvania law, to be exempt from overtime under the “white collar exemptions,” an employee must meet both the salary basis test and the duties test, meaning they must make more than a certain amount weekly and perform certain identified duties. The salary threshold has been stagnant for decades. In 2016, however, the Department of Labor (DOL) announced new regulations that would increase the salary threshold from $23,660 annually ($455 per week) to $47,476 (or $913 per week).  The regulations however, fell short of becoming law when a federal court in Texas enjoined the DOL from implementing it, only weeks before it was set to go into effect.  Today, the federal law remains in limbo, with speculation that new regulations will be issued raising the salary test to less than the previously anticipated increase, although the exact amount remains unclear.

In the meantime, however, Pennsylvania Governor Tom Wolf has taken measures into his own hands. On January 17, 2018, Governor Wolf announced plans to issue rules that would increase the salary level from $455 per week ($23,660 annually) to $610 per week ($31,720 annually), beginning on January 1, 2020.  The threshold salary would again increase on January 1, 2021 to $39,832, followed by a third increase in 2022 to $47,892.  After the year 2022, the salary threshold would increase automatically every three years.  The goal of these proposed rules is to strengthen the middle class.

Although these rules have not yet been passed, employers should keep their eyes out for any changes that may occur. If the new rules do become implemented, Pennsylvania employers would be required to follow Pennsylvania law in determining overtime eligibility for Pennsylvania workers, rather than the federal law, assuming federal law remains less favorable for employees.

Kali T. James-Wellington