The United States Department of Labor (“DOL”) at last has issued its final rule raising the salary threshold for white-collar overtime exemptions. Originally, a final rule was passed under the Obama administration, raising the level to $47,476.00 per year, and tying further raises to inflation. That rule was negated in court.
The DOL has been working on revisions, and the new final rule requires that, to be eligible for white-collar exemptions from overtime, an employee must: (1) be paid a salary not subject to change based on quantity or quality of work; (2) perform the duties of one of the white-collar exemptions; and (3) earn at least $684.00 per week ($35,568.00 per year). Unlike the earlier rule, there will be no automatic increase in the threshold amount. Instead, the DOL has said that it will review the threshold periodically to see if further increases are warranted. The final rule goes into effect on January 1, 2020.
Unfortunately, that is not the end of the story. Under overtime law, if a state law is more favorable to employees than the federal law, employers must follow the provisions of the state law. In Pennsylvania, that is the Pennsylvania Minimum Wage Act (“the Act”). Pennsylvania has proposed and revised a potential new regulation that would differ from the federal threshold. If enacted, the Pennsylvania threshold would need to be used for determining exempt status for employees in Pennsylvania. Under Pennsylvania’s proposed regulation, the threshold would match the new federal threshold in 2020, but increase to $780.00 (or $40,560.00 annually) in 2021 and to $875.00 (or $45,500.00 annually) in 2022. After 2022, the threshold will be adjusted automatically every three years. Except for 2020, these amounts are significantly higher than the final federal threshold. The press release for the new Pennsylvania proposal states that the Wolf Administration does not believe the new federal threshold reflects what Pennsylvanians actually are being paid. The Pennsylvania proposal awaits final approval from the Independent Regulatory Review Commission on November 21, 2019 before it will become final. The Commission is accepting comments on the proposal through November 18, 2019.
What Does This Mean For You? If your company has exempt employees, you will need to make sure they will earn at least $35,568.00 per year beginning in 2020. Keep in mind that exempt employees also need to be paid on a salary basis, and need to meet the duties requirements of one or more exemptions. If any of your employees do not meet any of these requirements, they are nonexempt and must be paid 1-1/2 times their regular rate of pay for all hours worked over 40 in one workweek. If the Pennsylvania regulations are finalized, beginning in 2021, your company’s employees will need to earn even more in order to be considered exempt. We will keep you posted.
If you have any questions or concerns about this update, or any other employment or labor law questions, please contact S. Whitney Rahman at email@example.com or (717) 509-7237 or Grace C. Nguyen Bond at firstname.lastname@example.org or (717) 509-7226.
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