Significant Changes to Pennsylvania’s Overtime Regulations Raising Concerns

| November 9, 2019

VENANGO CO., Pa. (EYT) – The Pennsylvania Department of Labor & Industry (L&I) recently submitted the final regulation to expand eligibility for overtime in the state, but whether or not this is good news is still up for debate.

The new regulation will expand eligibility for overtime to 143,000 salaried workers and strengthen overtime protections for 251,000 more. However, whether or not these employees will actively benefit from the change is an ongoing question.

“We’ve spent a lot of time talking about it,” Susan Williams, President/CEO of Venango Area Chamber of Commerce told exploreVenango.com.

“We have to acknowledge that the threshold should have been adjusted over time, but while this is less than what was proposed a few years ago, it is still a big leap, especially for small businesses and non-profit organizations.”

According to Williams, many small businesses and non-profit organizations in the region will probably be unable to absorb the cost of moving salaries up to the new threshold, and may have to opt to switch some employees over to hourly pay and make major adjustments in how they operate.

“It leaves employers with two choices: keep salary and raise people up to the new rate, or change people over to hourly, and every time they hit 40 hours, you’re paying time and a half. Many will simply have to freeze at people at 40 hours and say ‘you have to go home, you can’t work any further,’ but then who does job left undone?”

In the case of some area non-profit organizations that rely on grant funding to pay the salaries for their executive leadership, Williams said this change could be a major hurdle.

“When we started meeting with small businesses and non-profits, we found that it was going to impact some non-profit leadership. Some may even have to close their doors.”

Williams noted that while there may be some cases of employers abusing salaried employees by overworking them without compensation, and the law should certainly try to address that, the current plan simply makes too large of a leap all at once.

“It’s unfortunate the fact that this wasn’t worked on in a more gradual, thoughtful manner over past decade and resulted in an urgent situation.”

Tracy Becker, Executive Director of the Clarion Area Chamber of Business & Industry, noted many of the same issues.

“We are concerned of the impact it will have for our local businesses and employees,” Becker said.

According to Becker, the first version of the regulation, from June 2018, proposed more than doubling the wage threshold for exempt status.

“Now after many businesses from across the Commonwealth has pleaded with Labor and Industry to revise the proposed regulation, there are only minimal changes,” she noted.

“The recent proposal would still increase the salary threshold by over 92 percent and require a regular increase formula that would impose larger increases.”

Becker said that many businesses in the area will not be able to absorb the higher labor costs.

“Employers will be forced to convert salaried employees to hourly status in order to track and cap hours. This may entail a more rigid work schedule with less flexibility, burdensome record-keeping, fewer training opportunities and benefits. Those salaried employees will risk less take-home pay if hours worked in a week dip below 40.”

The Department of Labor & Industry’s new regulation is intended to modernize overtime rules by clarifying requirements and updating the salary threshold to reflect current wages paid to Pennsylvanians working in executive, administrative, and professional occupations.

It will raise the salary threshold to determine overtime eligibility for salaried executive, administrative, and professional workers from the federal overtime salary threshold of $455 per week, $23,660 annually, to $875 per week, $45,500 annually.

The United States Department of Labor (U.S. DOL) issued a final rulemaking in September raising the federal overtime salary threshold to $35,568, which, on January 1, 2020, will make 61,000 Pennsylvanians newly eligible for overtime.

However, according to a release from the Pennsylvania Department of Labor & Industry, the Wolf Administration does not believe the new U.S. DOL rule truly reflects what Pennsylvanians are being paid, and made the decision to set the minimum salary threshold at $45,500, to be phased in over two years beginning in 2021. By 2022, an additional 82,000 workers in Pennsylvania will be eligible for overtime.

This increase will be phased in over three steps: $684 per week, $35,568 annually (per federal rule), on January 1, 2020; $780 per week, $40,560 annually in 2021; and $875 per week, $45,500 annually in 2022, extending overtime eligibility to 143,000 workers in three years.

Based on public feedback received by L&I, these revised thresholds are lower than the amounts in the department’s original proposed overtime regulation updates from June 2018. Starting in 2023, the salary threshold will adjust automatically every three years.

“Overtime laws are among the most difficult for employers to administer, this new proposal will still be unnecessarily complicated and inconsistent,” Becker said.

“We here at the Clarion Area Chamber of Businesses & Industry do not support the PA Department of Labor and Industry’s proposal of advancing the massive expansion to overtime – they need to hear the voices of our businesses!”


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