Pennsylvania Updates How Tipped Employees Are Paid
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Governor Wolf continues the push to increase the minimum wage in Pennsylvania. He supports legislation to raise Pennsylvania’s minimum wage to $12 per hour, with an ultimate goal of $15 per hour. The Governor also supports elimination of the $2.83 per hour minimum wage for tipped workers.
05.12.22
In the meantime, on Wednesday, Pennsylvania Department of Labor & Industry Secretary Jennifer Berrier announced regulations that change Pennsylvania’s Minimum Wage Act rules by updating how employers pay tipped workers and ensuring that salaried employees with fluctuating schedules are appropriately compensated for overtime. The new regulation will go into effect on August 5, 2022.
The regulation includes:
- An update to the definition of “tipped employee,” that increases the amount in tips an employee must receive monthly from $30 to $135 before an employer can reduce an employee’s hourly wage from $7.25 per hour to as low as $2.83 per hour.
- Alignment with new federal regulations codifying long-standing policies that govern employer tip credits to allow employers to take a tip credit under certain conditions, including that the employee spends at least 80 percent of their time on duties that directly generate tips, commonly known as the 80/20 rule.
- Alignment with updated federal regulations that allow for tip pooling among employees but in most cases excluding managers, supervisors and business owners.
- A prohibition on employers deducting credit card and other non-cash payment processing transaction fees from an employee’s tip included with a credit card payment or other non-cash methods of payment.
- A requirement for employers to clarify that automatic service charges are not gratuities for tipped employees.
- This regulation also updates the definition of “regular rate” for salaried employees whose overtime pay is determined by the fluctuating workweek method, clarifying that for the purpose of calculating overtime, the regular rate is based on a 40-hour work week.
L&I also plans to host webinars for business owners and other stakeholders to learn about the updated regulations. Information about how to register for the webinars will be posted to L&I’s website. If you have questions, you may also contact the author of this Alert, Chuck Ercole, at 215.569.4282 or cercole@klehr.com
Author Chuck Ercole is a partner in the labor & employment practice group at Klehr Harrison