For the first time in more than four decades, the Pennsylvania Department of Labor and Industry has modified the Commonwealth's overtime regulations. These amendments, which became effective on October 3, 2020, raise the minimum salary threshold for overtime exemption. They also modify the definitions of executive, administrative, and professional employees to make them more consistent with the Fair Labor Standards Act. Accordingly, employers should closely review these changes, which are described in detail below, and adjust their overtime policies and procedures as necessary.
I. Salary Threshold
As a reminder, Pennsylvania employers are not required to pay overtime to an employee who works in a bona-fide executive, administrative or professional capacity, provided the employee's salary meets the minimum salary threshold. Recent revisions to the overtime regulations create a phased-in increase to the salary threshold as follows:
- October 3, 2020 - $684 per week or $35,568 annually;
- October 3, 2021 - $780 per week or $40,560 annually;
- October 3, 2022 - $875 per week or $45,500 annually.
Significantly, employers must keep in mind that the salary threshold is only one part of the analysis to determine if an employee may properly be classified as exempt from overtime pay requirements. In addition to meeting the salary threshold, an employee must also satisfy the “duties test” before the employee is properly classified as exempt.
II. Duties Test
A. Executive Capacity
Employment in a bona-fide executive capacity means work by an individual:
- Whose primary duty is the management of the enterprise in which he or she is employed, or of a customarily recognized department or subdivision;
- Who customarily and regularly directs the work of two or more employees;
- Who has the authority to hire or fire employees, or whose suggestions or recommendations as to the hiring, firing, advancement, promotion, or other change of status of employees are given particular weight.
B. Administrative Capacity
Employment in a bona-fide administrative capacity means work by an individual:
- Whose primary duty is the performance of office or nonmanual work directly related to management or general business operations of the employer or the customers of the employer;
- Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
C. Professional Capacity
Employment in a bona-fide professional capacity means work by an individual:
- Whose primary duty is the performance of work requiring either
of the following:
- Knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized instruction and study;
- Invention, imagination, originality, or talent in a recognized field or artistic or creative endeavor.
In light of the recent revisions to Pennsylvania's Minimum Wage Act, employers should review not only employee pay, but also job descriptions. By analyzing the actual work performed by employees, employers may ensure compliance with state and federal overtime laws.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.