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PA Proposed Changes to Salary Thresholds for Exempt Employees

    July 23, 2018

    Pennsylvania’s Proposed Rulemaking Set to Increase the Salary Threshold for Exempt Workers and Simplify the Duties Tests
    By CCHRA Legislative Chairperson Jennifer Ermilio, Esq. and Zachary Davis, Esq.
    Stevens & Lee, P.C.

    (July 2018)
    Pennsylvania employers could soon be required to reclassify their current executive, administrative and professional employees (“EAPs”) as a result of a proposed rulemaking issued by the Pennsylvania Department of Labor and Industry (“PA DOL”) on June 23, 2018. The proposed rulemaking would amend the Pennsylvania Minimum Wage Act (“PA MWA”) regulations to increase dramatically the minimum salaries required for EAPs to be classified as exempt from minimum wage and overtime compensation under PA law. It would also amend the PA MWA regulations to clarify and simplify the tests used to determine whether employees’ duties qualify them to be classified as exempt EAPs under the PA MWA.

    The proposed rulemaking would amend the PA MWA regulations to increase the minimum salary threshold for EAP employees to be exempt. Currently the minimums are $155 under the “long test” ($170 for professionals) and $250 under the “short test” mentioned below. Under the new rule, these would increase to $610 per week one year from the effective date of the final rulemaking[1], $766 per week two years from its effective date, and $921 per week three years from its effective date. Every third year thereafter, as of January 1, the rate would be adjusted to the 30th percentile of weekly earnings of full-time nonhourly workers in the Northeast Census region in the second quarter of the prior year as published by the United States Department of Labor, Bureau of Labor Statistics. This figure would be published on the PA DOL’s website and in the Pennsylvania Bulletin.

    The stated purpose of the salary threshold changes is the belief that the existing salary minimums (last updated in 1977) result in improper classification of employees, as they are not reflective of the current salaries of individuals who are EAPs. The same reasoning applies to the Fair Labor Standards Act (“FLSA”), under which the thresholds were last updated in 2004. The automatic tri-annual adjustment to the minimum weekly salary is intended to avoid the salary threshold from becoming outdated.

    The crucial significance of the proposed rulemaking is that employers covered by the PA MWA would be required to look to the proposed higher salary thresholds for their Pennsylvania employees to qualify as exempt from overtime compensation, despite the lower salary thresholds that remain in effect under the FLSA – currently $455 per week.

    The proposed rulemaking would also amend the PA MWA regulations to eliminate the long and short duties tests Pennsylvania has used to determine whether employees qualify as exempt EAPs and would make other changes to the regulations for clarity and consistency. The proposed changes in this regard are primarily designed to provide greater lucidity and bring the duties tests used under the PA WMA for EAPs in line with the tests employed pursuant to FLSA regulations. Therefore, employers would no longer need to make separate evaluations under both the FLSA and PA MWA to determine whether employees’ duties qualify them to be exempt EAPs.

    Businesses with employees in Pennsylvania should familiarize themselves with the proposed rulemaking and keep abreast of its progress as it is likely to be adopted either in its current form or a modified form in the forseeable future. The text of the proposed rulemaking may be found at https://www.pabulletin.com/secure/data/vol48/48-25/961.html

    Pennsylvania employers and other interested persons have until July 22, 2018 to submit comments, suggestions or objections regarding the proposed rulemaking. Feedback should be sent to Brian Smolock, Director, Bureau of Labor Law Compliance, Department of Labor and Industry, 651 Boas Street, Room 1301, Harrisburg, PA 17121, (717) 787-0606, bsmolock@pa.gov.

    Jennifer Ermilio, Esq. has served as CCHRA’s Legislative Chairperson since 2014.She enjoys giving legal updates at CCHRA’s monthly meetings and may be contacted at jae@stevenslee.com with any questions.

    Disclaimers: This article has been prepared for informational purposes only and does not constitute legal advice.  The information presented is not to be construed as an offer to represent you, nor is it intended to create an attorney-client relationship, nor does the receipt of such information constitute, an attorney-client relationship. Each situation is unique and the generalities mentioned may not apply to your situation.  Therefore, you should not rely on the information contained in this article without first obtaining the advice of a competent employment attorney. 

    The opinions and views expressed in this article are the opinions of the author and do not necessarily reflect the opinions or views of CCHRA or its members.