HARRISBURG – A proposed regulation to reshape the overtime compensation of employees throughout Pennsylvania was approved 3-2 by the Independent Regulatory Review Commission on Friday, and now heads to the desk of Attorney General Josh Shapiro for review.
As approved by the IRRC during last Friday morning’s public meeting, the new proposed regulation from the state Department of Labor & Industry would expand eligibility for overtime to 143,000 people and strengthen overtime protections for 251,000 more, for a grand total of 394,000 workers who would potentially benefit from the updated overtime rules.
For the regulation to be made effective later this year, Shapiro’s office must first subject it to legal review within a 30-day window, and then it must be published by the State in the Pennsylvania Bulletin.
IRRC Commissioners Murray Ufberg, Dennis A. Watson and George D. Bedwick voted in favor of approving the regulations, while Commissioners W. Russell Faber and John F. Mizner cast their votes against it.
Bedwick advised that the Department of Labor & Industry cooperate with stakeholders in bringing the regulation forward.
Such a regulation had been recommended by Democratic Pennsylvania Governor Tom Wolf since 2018, after the majority-Republican Legislature chose not to raise state minimum wage amounts above federal levels.
“This is an important victory for thousands of workers. People who work overtime should be paid for it. This is absolutely the right thing to do,” Wolf said.
“Today’s approval of my plan will modernize our outdated overtime rules so more people are eligible for time-and-a-half pay. This will put more money in the pockets of workers and strengthen the middle class.”
According to the State, due to overtime compensation rules not being updated in more than 40 years, a salaried worker earning as little as $23,660 per year, below the poverty line for a family of four, can work more than 40 hours per week and not be guaranteed overtime pay at time-and-a-half.
“This final regulation ensures that employees who work overtime are fairly and fully compensated for their labor in accordance with the original intent of the Pennsylvania Minimum Wage Act,” the State said in its proposal.
A previous proposal for adjusted overtime compensation rates made last year met criticism from the IRRC, which felt it “lacked justification” to support a move to such a high salary threshold.
Subsequent to the commission’s criticism and a summer tour consulting business leaders, the state’s Department of Labor & Industry went back to the drawing board to create a new version of the proposal.
In Pennsylvania’s latest proposal, the salary threshold that employees in executive, administrative and professional occupations must meet to be entitled to overtime would begin at the new federal salary threshold, which is $684 per week or $35,568 annually. In the first year, that would then increase to $875 per week or $45,500 annually by 2022. Employees whose salary is less than that amount are entitled to overtime pay.
Every three years after 2022, the threshold would be updated automatically.
The state’s proposed pay threshold would be gradually increased to the 2022 rate, as seen here:
| Weekly | Annual | |
| Current | $455 | $23,660 |
| 2020 | $684 | $35,568 |
| 2021 | $780 | $40,560 |
| 2022 | $875 | $45,500 |
Similar to the federal rule, Pennsylvania’s final rule would permit up to 10 percent of the salary threshold to be satisfied by non-discretionary bonuses, incentives and commissions paid every year. However, the federal salary threshold would not be automatically adjusted – instead, the U.S. Department of Labor will periodically review the salary threshold, and update it only after a notice and public comment period.
At Friday’s meeting, Rebecca Oyler from the National Federation of Independent Business said many employees would likely be re-classified under the regulation, damaging their wages and benefits, and possibly leading to businesses shutting their doors or laying off their staff.
In contrast, Steve Hertzenberg from Keystone Research stated the regulation would make Pennsylvania’s economy “less rigged” for its working-class citizens, and added other states like Colorado, New York and Washington have set even higher salary threshold levels than what was being proposed for Pennsylvania.
State Business Groups Express Disappointment With Regulation, Approval
Several state business groups opposed the regulation prior to its passage, and one of them issued a statement in the aftermath of Friday’s IRRC meeting.
Pennsylvania Chamber of Business & Industry President & CEO Gene Barr said the group was “disappointed” with the IRRC’s passage of the overtime pay regulation.
“We are disappointed by the Independent Regulatory Review Commission’s decision to move forward with the overtime eligibility rule change. In 2018, during the initial phase of the review process, hundreds of opposition comments were submitted from a wide range of stakeholders – including nonprofits, higher education, local governments, small businesses among many others who described unsustainable cost increases and harm to workplace morale as employees are forced to be shifted from guaranteed salaries to hourly clock-in, clock-out positions,” Barr said.
Barr added the proposal approved today did not reflect the concerns of stakeholders who would be affected by it.
“Many of these concerns were echoed by IRRC, which directed the Department to re-engage with stakeholders and submit a revised proposal for consideration. Unfortunately, the proposal approved today is only minimally different from the Department’s initial proposal and largely disregards the concerns raised by stakeholders. We urge the General Assembly to consider the true impact of this proposal and for each legislative chamber to issue disapproval resolutions rejecting the change,” Barr stated.
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com