The Wolf administration is moving forward with a plan to make 143,000 Pennsylvanians newly eligible for overtime.
The final regulation, published Thursday, would gradually increase the overtime threshold for certain salaried, white-collar workers to $45,500 a year. Employees who make less than that amount would be eligible for time-and-a-half pay after working 40 hours a week.
The change, if approved by a state regulatory commission, wouldn’t necessarily mean higher wages for these employees, said Stephen Herzenberg, executive director of the progressive Keystone Research Center.
Rather, it could benefit them by restoring the true 40-hour workweek.
“These moderate-wage salary workers are really hard working people,” Herzenberg said, “that make our businesses large and small, for-profit and not-for-profit, … function.”
Herzenberg said many workers have become so accustomed to the status quo that they may not realize that salaried employees are even eligible for overtime.
The federal Fair Labor Standards Act “requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek,” according to the U.S. Department of Labor.
There are exemptions, however, for people who meet the definition of an executive, administrative, or professional employee. This is determined by duties as well as base pay.
If the base pay of a person in one of those categories falls below the current threshold, then his employer owes him overtime.
But as supporters of the overtime change note, that salary level has not kept up with inflation.
The current federal threshold is $455 per week, or $23,660 annually. That’s roughly $11 an hour.
“Even the Trump administration realized it was out of line,” said Rick Bloomingdale, president of the Pennsylvania AFL-CIO.
Under a federal regulation finalized in September, that number will rise to $35,568 as of Jan. 1, 2020, which will make an additional 61,000 Pennsylvanians eligible for overtime.
The Wolf administration would phase-in its proposed threshold of $45,500 over three years, ending in 2022 when 82,000 more workers — or 143,000 total — would be newly eligible for overtime.
According to the Economic Policy Institute, 63 percent of the workers that would be affected by Pennsylvania’s regulation are women and nearly 16 are minorities.
A duty to change the duties test
The change isn’t a done deal yet.
The regulation will go before the five-member Independent Regulatory Review Commission at its Nov. 21 meeting.
The Pennsylvania Chamber of Business and Industry is urging the commission to reject it.
“This proposal is only minimally different from the department’s initial proposal, which the PA Chamber opposed along with a broad range of stakeholders including nonprofits, higher education, local governments, small businesses among many others,” Chamber President and CEO Gene Barr said in a statement.
Pennsylvania’s Department of Labor & Industry first proposed the rule in 2018, with an overtime threshold of $47,892 — the same number unsuccessfully put forth by the Obama administration in 2016.
“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,” the agency said in a press release.
In the final regulation, Labor & Industry said it organized “10 stakeholder roundtables” with help from the Chamber and the state AFL-CIO.
The confusing long and short test in Pennsylvania have led many employers to believe that, regardless of duties, any employee making a salary over $23,660 is automatically ineligible for overtime,” the department wrote. “The higher salary threshold will likely result in employers reviewing the duties of employees making at our below $45,500, and therefore potentially paying workers overtime who have in fact already been non-exempt.”
Barr said in a statement those who opposed the proposal “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.”
Alex Halper, director of government affairs for the Chamber, clarified by email that “employers may not have the extra money to either raise salaries above the new threshold (in order to maintain exempt status) or pay the extra time-and-a-half required for any hours worked above 40 in a week. This means employees must start tracking hours to ensure they do not exceed 40.”
In addition to raising the threshold, the Department of Labor & Industry is also proposing to clarify the duties test that allows employers to claim a worker is exempt from overtime. This change will “strengthen overtime protections for 251,000″ additional workers.
“This final overtime regulation ensures that the duties for executive, administrative, and professional workers more closely align to the federal overtime regulation, making it easier for employers to know if a worker qualifies for overtime,” the department said in a press release.
As of Thursday and Friday, stakeholders were still reviewing the nearly 300-page final regulation.
But Halper said there are apparently still “unnecessary and unintended inconsistencies between state law and [Fair Labor Standards Act], despite the department making some progress.”
The duties test gets less attention than the salary threshold, but it’s just as important.
Bloomingdale used as an example managers at convenience stores, who may have responsibilities to match the title but are paid $14 an hour.
The Pennsylvania gas station chain Sheetz recently paid $1.8 million to settle a suit brought by assistant managers who said they were improperly classified as exempt from overtime.
These types of workers are “being taken advantage of,” Bloomingdale said, “and not being paid for the real work they’re doing.”
There are a few ways businesses may react if the Wolf administration’s changes are adopted. They could pay the overtime, limit a worker’s hours, raise an employee’s salary above the threshold, or pay overtime but reduce “base pay or benefits,” Labor & Industry wrote in the final regulation.
“One of the most common things we hear is that employees interpret this move as a demotion — even if they’re now technically eligible for overtime,” Halper said.
The Keystone Research Center’s Herzenberg rejected that argument, borrowing a phrase coined by women who organized for better working conditions at Harvard decades ago.
“You can’t eat prestige.”