Employer Be Nimble: Pennsylvania Swaps Wage and Hour Salary Threshold Regulation For Bill Increasing the Minimum Wage Rate

Kathy Speaker MacNett, Esq.

November 25, 2019

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In the last E-ALERT, we described a Proposed Pennsylvania Regulation (“PR”), which would have increased the salary threshold to qualify for the overtime exemption for the Pennsylvania Minimum Wage Act’s (“PMWA”) so-called White-Collar (Executive, Administrative and Professional) employees far beyond the 2020 federal level.  That PR was scheduled for consideration by the Independent Regulatory Review Commission (“IRRC”) on November 21, 2019, but was withdrawn from consideration by the time the IRRC meeting convened. 

The PR would have increased that salary threshold to the 2020 federal level of $684 whenever the PR was published as a Final-Form Rulemaking in the Pennsylvania Bulletin.  However, the PR, unlike its federal counterpart, would have continued the salary threshold increases above the federal levels in 2021 and 2022, and beyond every three years thereafter.  This major change was expected to add over $5,000 each year to the salary threshold in Pennsylvania for 2020, 2021 and 2022 with the possibility of even greater increases every three years thereafter.

We expressed the practical concern that an employer, who was compliant with the federal regulations mistakenly using a $684 weekly salary threshold in 2020 or after, could be out of compliance with the PR when it increased to $789 weekly and $875 weekly and beyond.  We expected the PR, if adopted, to be particularly burdensome on Pennsylvania’s small and medium sized businesses, non-profits and religious/private schools.

Our concerns disappeared when the Governor withdrew the PR on the salary threshold prior to the IRRC vote.  The withdrawal followed the Senate’s passage of SB 79, which in effect swapped the continued increase in the salary threshold for an increase in the actual minimum wage rate from its current level of $7.25 per hour to $9.50 by January 1, 2022 in steps as follows:

                    July 1, 2020             $8.00
                    January 1, 2021       $8.50
                    July 1, 2021              $9.00
                    January 1, 2022       $9.50

This wage rate increase is beyond the federal wage rate, but is more aligned to the wage rate in a number of other states. 

SB 79, in its present form, also includes language eliminating the differences in interpretation between the PMWA and the Fair Labor Standards Act (“FLSA”), which should be helpful to employers in streamlining differences between the state PMWA and the federal FLSA.  The bill also would add an exemption for an outside salesman, a highly-compensated employee, a computer system analyst, a computer programmer, a software engineer or other similarly skilled workers from both minimum wage and overtime.  Up to 10% of the salary or fee amount for the salary threshold may result from payment of non-discretionary bonus, incentive or commission.

The bill also contains a provision stating that an employer may not deduct from tips on credit cards, the amount charged by a credit card company for processing the transaction.  The employer must pay the employee the tip amount no later than the next regular payday following the date the customer authorized credit card payment. The bill, if it passes the House, would take effect 90 days after signature by the Governor.

Bottom Line:  SB 79 bill contains pro-employee increases in the basic minimum wage rate, but also includes many provisions favorable to employers, and reduces the differences between the federal FLSA and the state PMWA. Stay tuned to see what happens to the proposed minimum wage rate during its consideration by the Pennsylvania House of Representatives, and be prepared to implement the FLSA’s increased salary threshold of $684 weekly for white collar employees effective January 1, 2020.


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