On Aug. 5, new Pennsylvania wage-and-hour regulations for tipped and salaried, nonexempt workers under the Pennsylvania Minimum Wage Act (PMWA) went into effect. This article focuses exclusively on the new rules for salaried, nonexempt employees.
Under the new regulation, Pennsylvania employers must calculate the regular rate of pay for salaried, nonexempt employees by adding all remuneration (subject to certain preexisting exceptions) paid to the employee during a workweek (e.g., weekly salary, nondiscretionary bonuses, and commissions) and dividing this amount by 40 hours.
To calculate the overtime pay due, the regular rate is multiplied by 1.5 and then multiplied by the number of hours worked in excess of 40 in that workweek.
The new PMWA salaried, nonexempt overtime formula is a departure from the federal Fair Labor Standards Act's (FLSA) fluctuating workweek (FWW) method of calculating overtime premium pay for salaried, nonexempt employees. Under the FWW method, which remains permissible under federal law, overtime pay for salaried, nonexempt employees may be calculated by adding the employee's salary and all other remuneration that must be included in the regular rate, dividing that total compensation by the total hours worked in a workweek, multiplying this rate by 0.5 to determine the half-time rate, and multiplying the half-time rate by the number of overtime hours worked.
The federal FWW method cannot lawfully be used for Pennsylvania salaried, nonexempt workers. Indeed, this prohibition has been in place for years, as the Supreme Court of Pennsylvania held in 2019 in Chevalier v. General Nutrition Centers, Inc. that the PMWA precluded employers from using the FWW method. The new rule both codifies the Chevalier decision and expands upon it by providing that the regular rate for salaried, nonexempt employees is calculated by dividing all relevant remuneration by 40, rather than by all hours worked.
Employer Takeaways
Pennsylvania's new formula for calculating overtime pay for salaried, nonexempt employees is by design more protective for workers and results in greater overtime pay for this category of workers than under the federal FWW formula. All employers with salaried, nonexempt employees in Pennsylvania may want to evaluate whether their practices are in compliance with the new PMWA formula.
Moreover, Pennsylvania employers may have questions about whether the new rules impact overtime calculations for hourly, nonexempt employees. The new rules do not address the regular rate calculation for Pennsylvania hourly, nonexempt employees.
The Pennsylvania Department of Labor and Industry clarified in its answers to frequently asked questions about the new PMWA rules that the "updated regulation will not change overtime pay calculations for hourly employees." However, the potential for continued development in this area is possible.
Jennifer G. Betts, Rick L. Etter, and Philip K. Kontul are lawyers with Ogletree Deakins in Pittsburgh. © 2022. All rights reserved. Reprinted with permission.
Was this resource helpful?
Validate your HR expertise
Earning your SHRM-CP credential makes you a recognized expert and leader in the HR field.
Related Content
Learn how Marsh McLennan successfully boosts staff well-being with digital tools, improving productivity and work satisfaction for more than 20,000 employees.
The proliferation of artificial intelligence in the workplace, and the ensuing expected increase in productivity and efficiency, could help usher in the four-day workweek, some experts predict.
As artificial intelligence technology continues to develop, the demand for workers with the ability to work alongside and manage AI systems will increase. This means that workers who are not able to adapt and learn these new skills will be left behind in the job market.