Pennsylvania Seeks to Raise Minimum Wage, Scrap Salary Increase for Overtime Exemption
The Pennsylvania Senate passed Senate Bill 79 on November 20, 2019, which would raise the minimum wage but also halt the state Department of Labor and Industry ("DLI") from raising the salary threshold for overtime wages. The bill, which still needs to pass the house and be signed by the governor, is expected to pass and represents a compromise between the Republican-controlled legislature and Democratic governor.
Under the proposed law, Pennsylvania’s minimum wage would gradually raise over the next three years to:
- $8.00/hour effective July 1, 2020
- $8.50/hour effective January 1, 2021
- $9.00/hour effective July 1, 2021
- $9.50/hour effective January 1, 2022
Pennsylvania’s current minimum wage is the same as the federal minimum of $7.25/hour. The proposed increase would bring Pennsylvania closer to many of its neighboring states. For example, Maryland is set to raise its minimum wage incrementally to $15.00/hour by 2025, New Jersey to $15.00/hour by 2024, and New York will implement a $15.00/hour minimum wage on January 1, 2020. Delaware raised its minimum wage earlier this year to $9.25/hour.
As part of the compromise for this minimum wage increase, the bill would halt plans by the DLI to increase the salary threshold for overtime exempt employees. Under federal regulations, the salary threshold for an employee to be exempt from overtime wages will increase to $35,568 on January 1, 2020. The state DLI had previously proposed regulations to increase that threshold to $45,000 in Pennsylvania, having the effect of making more employees eligible to receive overtime pay. SB 79 eliminates that increase and provides that the state will continue to use the lower federal threshold. Having the same state and federal overtime exemption thresholds creates less burdensome compliance requirements on employers.
Pennsylvania employers should monitor this bill as it proceeds through the house and potentially to the governor for signing. In its current form, the increased hourly wages could go into effect just seven months from now, making it important for employers to prepare for this possible adjustment.