HARRISBURG, Pa. (AP) — Gov. Tom Wolf’s administration is on the brink of making Pennsylvania one of a handful of states to expand eligibility for overtime pay beyond federal thresholds, winning a final vote Friday from a state regulatory board that agreed an increase was badly overdue.
The Independent Regulatory Review Commission voted 3-2 to approve a regulation that Wolf, a Democrat, first proposed two years ago amid a repeated failure to persuade the Republican-controlled Legislature to raise Pennsylvania’s minimum wage above the federal baseline.
“This is an important victory for thousands of workers,” Wolf said in a statement. “People who work overtime should be paid for it. This is absolutely the right thing to do."
The new overtime regulation is estimated to expand overtime pay eligibility to 82,000 of the very lowest-paid salaried workers in the next two years, delivering another $20 million to nearly $23 million a year in increased earnings after the rule takes full effect. There are about 2.2 million total full-time salaried employees in Pennsylvania, Wolf’s administration estimates.
The regulation phases in the increase in two steps and requires in 2022 that salaried workers earning up to $875 a week, or $45,500 a year, get time-and-a-half pay for any time they work over 40 hours in a week. The first salary step increase takes effect in 2021 to $780 a week, or $40,650 a year.
The regulation could take effect in several months, after a period to allow legislative objections that Wolf can reject and a review by the attorney general's office for legality.
The Trump administration just increased the federal overtime threshold for the first time since 2004, raising it Jan. 1 to $684 a week, or $35,568 a year, from $455 a week, or $23,660 a year. Federal courts blocked a move in 2016 by former President Barack Obama to raise the overtime threshold to about $47,000.
Advocates for the poor and groups affiliated with organized labor supported Wolf's regulation, but also said the expansion still leaves workers with far less earning power than they had decades ago.
In 1975, more than 60% of full-time salaried workers were automatically eligible to receive overtime pay, they say. Under the Trump administration's new overtime rule, just 15% will automatically get overtime pay, they say.
Opponents, including the Pennsylvania Chamber of Business and Industry and the United Way, contended that it will inflict higher costs on employers and possibly force those with thin margins to layoff employees or slash benefits and wages.
“Unfortunately, money doesn't appear out of thin air, just because the government mandates it,” Rebecca Oyler of the National Federation of Independent Business told the five-member panel during testimony Friday.
But a pair of studies on the 2004 overtime expansion showed positive outcomes for workers, the National Employment Law Project said.
Those studies predict that employers will increase the salaries of some employees to keep them exempt and some will start paying overtime to newly eligible employees, it said. Other employers will juggle the hours and pay of workers and even hire more workers to avoid paying overtime, it said.
Given the tight labor market, it is unlikely that employers will reduce base pay or benefits, Wolf's administration said.
Wolf had offered to sideline the overtime regulation if lawmakers agreed to raise Pennsylvania's minimum wage. The Pennsylvania Chamber of Business and Industry was something of an ally, viewing a modest minimum wage boost as the lesser evil.
However, House Republicans have balked at Wolf's November deal with the Senate to raise Pennsylvania's minimum wage in increments to a relatively modest $9.50 an hour in 2022, up from the current federal minimum of $7.25 an hour.
California, New York, Colorado and Washington have raised their overtime pay thresholds, while several other states are considering it. Those four states and 25 others set their minimum wage above the federal threshold.
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