Late Compromise Halts Proposed Changes to Pennsylvania’s White-Collar Exemptions

On November 21, 2019, the Pennsylvania Department of Labor and Industry (“DLI”) formally withdrew new regulations that would have increased the minimum salary requirements for the Pennsylvania Minimum Wage Act’s (“PMWA”) white-collar exemptions.  The withdrawal occurred on the same day the state’s Independent Regulatory Review Commission (“IRRC”) was scheduled to consider the new requirements and rule upon them at a public meeting.

The Withdrawn Rule

The final rule was issued on October 17, 2019, and would have increased the minimum salary threshold for the PWMA’s white-collar exemptions (administrative, professional, and executive exemptions to overtime requirements) in three stages from $35,568 per year on January 1, 2020, to $40,500 the next year, until finally reaching a $45,500 annual threshold on January 1, 2022.

Starting on January 1, 2023, the rule would have continued to increase the minimum salary threshold every three years, with employers receiving just 30 days’ advanced notice of the increased threshold.  In addition, the rule also sought to make the PMWA’s duties test for the state’s administrative, professional, and executive exemptions align more closely with the corresponding exemptions under the federal Fair Labor Standards Act (“FLSA”).

What Happens Next

The sudden withdrawal of the rule was part of a compromise with state Senate Republicans.  In exchange for the withdrawal, the Senate passed Senate Bill 79, which will (1) increase the state’s hourly minimum wage rate over several years from $7.25 to $9.50, and (2) amend the PMWA so that its minimum wage and overtime requirements are applied in the same manner as the federal FLSA, except where a higher standard is specified by state law.

Pennsylvania employers will want to keep an eye on the legislation as it makes its way through the House as Governor Wolf’s administration has promised to resubmit the regulations to the IRRC for final approval if Senate Bill 79 does not pass.

Additionally, employers should remember that even without the state regulations, changes to the federal FLSA will increase the white collar salary threshold from $23,660 ($455 per week) to $35,568 ($684 per week) effective January 1, 2020.