New legislation involving the expansion of Pennsylvania’s Minimum Wage Act (MWA) recently went into effect after three years of work under Gov. Tom Wolf’s administration. The legislation not only increases the maximum salary employees can earn, but it also allows them to still be eligible for overtime pay. The expansion will also change qualifications for executive, professional, and administrative worker exemptions.
Starting Jan. 1, 2020, workers who earn up to $35,568 annually may qualify for overtime. Starting by Oct. 3, 2021, the salary level will jump to $40,560—increasing again to $45,000 on October 3, 2022. Every three years beginning in 2023, the salary threshold will adjust automatically, allowing for up to 10% of salary levels to be satisfied via commissions, incentive payments, and non-discretionary bonuses.
The Pennsylvania overtime law requires that certain exempt workers be paid time-and-a-half for hours completed over forty in a workweek. In addition, the absence of an employment contract requires that employers pay employees their wages at least semi-monthly. Failing to do so can result in a fine, among other potential penalties. See 43 Pa.C.S. § 252.
The legislation amends the duties test for administrative, executive, and professional workers who may have been exempt from overtime rules. The criteria from the MWA more closely examines the criteria under the FLSA.
The qualifications for each exemption are examined below.
QUALIFICATIONS FOR THE EXEMPTIONS
Section 13(a)(1) of the FLSA provides an exemption from overtime pay for employees employed as bona fide executive, administrative, professional, or outside sales employees. While job titles do not determine exempt status, employees must meet the salary basis test by making no less than $684 per week, on a salary or fee basis. See C.F.R. § 541.300 (a)(1). In addition, the employee must receive a fixed and predetermined salary that is all or part of the employee’s compensation on a weekly or less frequent basis that cannot be reduced based on variations in the number of hours worked or the quality of work performed. See 29 C.F.R. § 541.602(a)
Executive Exemption
To qualify for an executive exemption, the employee’s work requires customary and regulatory direction of at least two full-time employees.
Examples of the type of work include the following: CEO, CFO, human resources director, bank branch manager, etc.
Administrative Exemption
To qualify for an administrative exemption, the employee’s work requires that the primary duties consist of office or nonmanual work that is directly related to management policies or general operation of employer or an employer’s customers. In addition, an administrative exemption requires that the type of work exercise both discretion and independent judgement.
Examples of this type of work include academic advisor, consultant, insurance claim adjuster, and purchasing agent.
Professional Exemption
To qualify for a professional exemption, the employee’s work requires that the primary duties consist of knowledge of an advanced type in a field of science or learning that is customarily acquired by a prolonged course of specialized instruction and study or work that is original in character in a recognized field of artistic endeavor. In addition, the work must require the exercise of discretion and judgement or require invention, imagination, or talent in a recognized field of artistic endeavor.
Examples of this type of work include that of a CPA, attorney, doctor, architect, engineer, author, cartoonist, musician, or musician.
WHAT THIS MEANS FOR EMPLOYEES AND EMPLOYERS
For the first time since 2004, the Trump administration increased the federal overtime threshold—raising it to $684 a week as of Jan. 1, or $35,568 a year, from $455 a week, or $23,660 a year, according to NBC Philadelphia.
Some proponents of Wolf’s regulation believe that this will help increase the salaries of exempt employees to keep properly classified. Employers will likely pay more overtime to certain newly eligible employees under the change in state law.
Opponents of the expansion note that this change will inflict higher costs on employers—particularly those hit hardest by the pandemic, such as non-profit organizations, restaurants, and small retailers; this could result increased lay-offs of some employees or hiring freezes.