PA EMPLOYMENT LAW CLIENT ALERT: Is More Money Coming To PA Employees? A Proposal By Governor Wolf Seeks To Expand Overtime Compensation For PA Employees

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Pennsylvania Governor Tom Wolf recently announced a proposal to expand overtime pay to an estimated 460,000 Pennsylvania employees. To that end, Governor Wolf requested the Department of Labor & Industry to prepare a plan to modernize Pennsylvania’s overtime rules, which have not been updated in more than 40 years. The first step in updating the rules is to increase the salary threshold to determine overtime eligibility for employees. Presently, the threshold for eligibility is set at the federal level of $455.00 per week, or $23,660.00 annually.  That level would increase to $610.00 per week ($31,720.00 annually) on January 1, 2020. The level would increase again to $39,832.00 on January 1, 2021 and to $47,892.00 in 2022.  Thereafter, the salary threshold will automatically increase every three years. 

The proposed changes will have an impact on executive, administrative and professional employees, to whom employers are generally not required to pay overtime. However, employers must ensure the employees are properly classified as those that work in an executive, administrative or professional capacity. Significantly, the mere payment of the designated salary is not sufficient to properly classify an employee as exempt from overtime. In that regard, regulations promulgated by the Department of Labor and Industry identify the duties applicable to each position. In order to be properly classified as exempt from the requirement for overtime pay, employees must meet the salary threshold and perform the duties applicable to each position. A summary of the duties of each position is provided below. 

            Executive Exemption

  • The employee’s primary duty consists of management of the enterprise in which he is employed or of a customarily recognized department or subdivision;
  • The employee customarily and regularly directs the work of two or more other employees;
  • The employee has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring or firing and as the advancement and promotion or any other change of status of other employees will be given particular weight;
  • The employee customarily and regularly exercises discretionary powers;
  • The employee does not devote more than 20%, or if the employee works in a retail or service establishment, does not devote as much as 40% of his hours of work in a workweek to activities that are not directly and closely related to the performance of the above referenced work.

            Administrative Exemption

  • The employee’s primary duties consist of the performance of office or non-manual work directly related to management policies or general operation of the employer or the employer’s customers;
  • The employee customarily and regularly exercises discretion and independent judgment;
  • The employee regularly and directly assists an employer or an employee employed in a bone fide executive or administrative capacity, who performs under only general supervision work along specialized or technical lines requiring special training, experience or knowledge, or who executes under only general supervision special assignments and tasks;
  • The employee does not devote more than 20% of time worked in a workweek, or if the employee works in a retail or service establishment, does not devote more than 40% of time worked in the workweek to activities which are not directly and closely related to the performance of the work described above

            Professional Exemption

  • The employee’s primary duty consists of the performance of work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized instruction and study or the performance of work that is original and creative in character in a recognized field of artistic endeavor;
  • The employee’s work requires the consistent exercise of discretion and judgment in its performance;
  • The employee’s work is predominately intellectual and varied in character, as opposed to routine mental, manual, mechanical or physical work, and is of such a character that the output produced or the result accomplished cannot be standardized in relation to a given period of time;
  • The employee does not devote more that 20% of time worked in a workweek to activities that are not an essential part of and necessarily incident to the work referenced above.

In addition to the increased salary threshold, Governor Wolf wants the Department of Labor and Industry to clarify the duties for executive, administrative and professional workers in an attempt to provide guidance to employers to determine if an employee is eligible for overtime. However, in the interim, employers should review the duties applicable to the executive, administrative and professional classifications, as well as the specific duties performed by employees to ensure that the employee is properly classified as exempt from the overtime requirement.  

Governor Wolf’s proposal, if implemented, will be a significant development in Pennsylvania employment law. It is anticipated that the Department of Labor and Industry will issue its proposal to update the overtime regulations in March, 2018. We will continue to monitor this issue and will provide updated information regarding any actions taken by the Department of Labor and Industry to move forward with Governor Wolf’s plan. However, Pennsylvania employers should review their pay policies and begin developing a plan for how to deal with the potential impact of paying overtime to additional employees.         

                               

           

    

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