On July 9, 2006, Governor Rendell signed legislation that substantially raised the minimum wage in Pennsylvania beyond the federal levels. These new rates go into effect January 1, 2007.

Minimum Wage
The new legislation amends the Minimum Wage Act of 1968 to increase Pennsylvania's minimum wage in two steps: from $5.15 per hour, the current federal minimum, to $6.25 per hour on January 1, 2007; and from $6.25 to $7.15 per hour on July 1, 2007. This means that employers paying less than $6.25 per hour will be required to raise their employees' wages at least to the new minimum effective, January 1, 2007.

Employers With 10 or Fewer Employees
A delayed implementation schedule is in place for employers with 10 or fewer full-time employees. These employers are required to increase the minimum wage to $5.65 per hour on January 1, 2007; $6.65 per hour on July 1, 2007; and $7.15 per hour on July 1, 2008.

Training Wages
Under the new law, employers can pay a training wage of $5.15 per hour for up to 60 days for employees under age 20. This training wage is based on the federal minimum wage rate. If the federal minimum wage increases, the minimum training wage must increase by the same amount. Upon hiring, employers must notify workers of both the training wage and the worker's right to receive the Pennsylvania minimum wage after 60 calendar days of employment. The law also makes it clear that other workers may not be displaced to allow the hiring of training-wage workers.

Unaffected Provisions of the Pennsylvania Minimum Wage Act
The new legislation does not affect the requirement that employers pay overtime to non-exempt employees. Just paying an employee on a salary basis is not enough for an overtime exemption. To be exempt, an employee must earn at least $455 per week/$23,660 per year, and be classified as an executive, administrative or professional worker, or as an outside salesperson. "Salary" means being paid for all hours worked in a workweek, whether it is more or less than 40 hours. "Executives" must manage a department of at least two or more employees and generally spend most of their work time in a managerial capacity.

"Administrative" employees must exercise discretion and independent judgment with respect to matters of significance and have a primary duty of office or non-manual work directly related to the management of the business. "Professionals" must have specialized education in a field of science or learning and must use their education and knowledge in their position constantly on an independent basis.

What Happens If The Federal Minimum Wage Is Increased?
There has been talk that one of the first things the new Congress wants to address is the federal minimum wage. If that happens, the Pennsylvania law should be viewed as a floor, not a ceiling. If the federal rates are set higher than the Pennsylvania rate, employers in Pennsylvania will have to pay the higher federal rate. If the federal government does not increase the minimum wage, or establishes a minimum wage that is below the state level, then employers in Pennsylvania will have to pay the rate established under state law.

Conclusion
Violations of federal and/or state wage and hour regulations may result in cumulative back wage liabilities and also may result in civil and/or criminal sanctions. If you have questions about whether an employee is exempt, the new minimum wage, overtime rates or any other matter, please let us know.