Kathy Speaker MacNett – managing member of the PA Chamber member law firm SkarlatosZonarich LLC and a long-time presenter at PA Chamber educational conferences on labor-related issues – was among the testifiers who warned of the ill-effects of the federal government’s new wage and hour rules before a joint Senate Appropriations and Labor and Industry Committee hearing last week.

MacNett highlighted key changes in the regulations in her testimony – mainly, that the regulations change the annual salary threshold from $23,660 to $47,476 – far higher than Pennsylvania’s existing salary threshold – and also set different salary standards for employees in different industries.

She expressed concerns that as a result of these rules, a number of employees will be converted from salaried to hourly status; adding that some employers are already worried about the impact of a variable hourly amount compared to a stable, salaried amount. MacNett also voiced that the change in salary level will restrict telecommuting flexibility, increase time spent on record keeping, and increase costs while decreasing the quality of service. She said she is certain that nonprofit organizations would be particularly vulnerable to the changes; a misapplication of exemptions will be a likely result; and employers will face a barrage of changes dealing with hourly staff.

MacNett also explained that the law is under a different framework than state law, making it difficult to follow and comply with; she also clarified that salaried employees are not necessarily exempt from overtime pay. “For most employees, the salary must be the right amount and the employee must generally meet a defined duties test before being treated as exempt from overtime,” MacNett stated. She further explained how federal regulations contrast with the state’s minimum wage laws, reminding lawmakers that the last time the regulations were updated (in 2004) there was a host of misclassification problems that moved many employees who were non-exempt into the exempt category.

As state legislators, you simply lack the authority to override the federal regulations,” she said. “However, you are not powerless.” MacNett then outlined ways in which the state legislature could take action. “Effective use of the time between now and December 1 is not to panic, but to calculate the anticipated impacts and decide whether it is fiscally sensible to change employees from salaried to hourly, simply raise their salaries, or reclassify the employee,” she concluded.

MacNett was joined on her panel by Pittsburgh attorney Robert Pritchard from the law firm of Littler Mendelson. Also testifying were several employers, representatives from the nonprofit and health services communities and several state agencies.

Reprinted from The Sentinel, A weekly publication of the Pennsylvania Chamber.  June 27, 2016.