Changes to how Pennsylvania tipped workers are paid begin

Pennsylvania’s tipped workers starting Friday have more protections, a move state officials say will level the playing field for employers competing in a tight labor market.

Changes to the state’s Minimum Wage Act have taken effect modernizing how employers pay tipped workers while working to ensure salaried employees with fluctuating schedules are appropriately compensated for overtime, according to the release from the state Department of Labor & Industry.

The changes include:

  • An update to the definition of “tipped employee,” adjusted for inflation since 1977, increasing the amount in tips an employee must receive monthly from $30 to $135 before an employer can reduce an employee’s hourly pay from $7.25 per hour to as low as $2.83 per hour.
  • Alignment with a recent federal regulatory update governing employer type credits to allow employers to take a type 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 a recent federal regulatory update to allow for type pooling among employees but in most cases excluding managers, supervisors, and business owners.
  • A prohibition on employers deducting credit card and other noncash payment processing transaction fees from an employee’s tip left with a credit card or other noncash method of payment.
  • A requirement for employers to clarify that automatic service charges are not gratuities for tipped employees

“As a former service industry worker, I have seen firsthand how employees can be taken advantage of due to outdated rules and regulations when it comes to how they are paid,” said agency Secretary Jennifer Berrier. “Servers, bartenders, hairstylists, nail techs, bellhops and dozens of other tipped-worker positions rely on the generosity of their customers for their livelihood and deserve regulatory protections that ensure these earned wages are theirs to keep.

“I know that struggle personally, hoping you earn enough money each shift to make ends meet. These updated regulations not only seek to keep tips in the pockets of workers who rightfully earned them, but to also ensure employers are playing by the same, fair rules.”

The regulations also update the definition of “regular rate” for salaried employees whose overtime pay is determined by the fluctuating workweek method, according to the release, clarifying that for the purpose of calculating overtime the regular rate is based on a 40-hour workweek.

However, these changes do not affect overtime compensation regulations for hourly workers, officials noted.

For more information, go to L&I’s Overtime and Tipped Worker Rules webpage.

Morning Call reporter Molly Bilinski can be reached at mbilinski@mcall.com.

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