New Overtime Exemptions Proposed in PA

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New Overtime Exemptions Proposed in PA

Summary Prepared by Hannah Locop, GPNP Program Manager
 

On June 23, 2018 PA’s Department of Labor and Industry proposed significant changes to the overtime threshold, the salary amount at which an employer may exempt an employee from earning time-and-a-half for working over 40 hours a week. Since 1977, that threshold has remained at $250 per week ($23,600 annually).

The increases are as follows over three years:

  • $610 per week ($31,720 annually) on the effective date of the adoption of the official rule-making
  • $766 per week ($39,832 annually) one year later
  • $921 per week ($47,892 annually) two years later

Three years after the initial adoption date and every three years going forward, PA DLI would adjust the overtime threshold to “the 30th percentile of weekly earnings of full-time non-hourly 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.” Up to 10% of an employee’s salary paid in “nondiscretionary bonuses, incentives or commissions” could count towards the threshold. As a result, “it is estimated that up to 460,000 salaried employees in Pennsylvania could benefit by January 1, 2022,” states the DLI in its Regulatory Analysis Form.

The DLI has outlined four main reasons for introducing this proposal, among them, aligning with federal regulation and updating Pennsylvania’s 40-year-old legislation. In 2004, the Federal Department of Labor (DOL) raised the overtime threshold to $455 per week. However, Pennsylvania law prevented federal regulation from overtaking state regulation. More recently in 2016, DOL introduced changes in overtime rules that would have increased the threshold to $913 per week by the end of the year (read GPNP’s Policy Update from 2016). Instead, a Federal District Court judge in Texas filed a preliminary injunction against the changes, leaving the federal salary threshold for overtime exemption at the 2004 rate.

GPNP encourages and supports providing a living wage. Though, questions remain for how nonprofits would cope with the practical limitations of the DLI’s proposal:

  • Increased labor costs without the ability to raise prices like for-profit companies
  • Additional administrative work in tracking hours
  • Changes in service delivery models to adjust to increased expenses

Proposed Action Item

Currently, the PA DLI is accepting public commentary on the proposed overtime changes until August 22, 2018. As nonprofit organizations employing Pennsylvania residents, GPNP’s members may submit written comments, suggestions or objections to the proposed changes to Bryan Smolock, Director, Bureau of Labor Law Compliance, whose information can be found below.

Bryan Smolock Director, Bureau of Labor Law Compliance Department of Labor and Industry 651 Boas Street, Room 1301 Harrisburg, PA 17121 (717) 787-060 bsmolock@pa.gov