The Department of Labor & Industry announced new proposed regulations to update decades-old rules about how employers pay tipped workers and ensure that salaried employees who work a fluctuating workweek schedule are appropriately compensated for overtime.
“The world of work has changed significantly since these regulations first went into effect in 1977, but tipped workers remain a sizable and critical segment of Pennsylvania’s workforce. They are the only workers whose take-home pay ultimately depends on the generosity of their customers and not the obligation of their employer. This proposal to update the Minimum Wage Act regulations aims to establish robust and modernized guardrails to protect tipped workers in the 21st century and ensure consistency for employers,” Secretary Jennifer Berrier said.
The department’s proposed regulation covers five primary areas for tipped workers:
– An update to the definition of “tipped employee,” adjusted for inflation since 1977, that increases 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.
– Codification of a recent federal regulatory update governing 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.
– An update to allow for tip pooling among tipped employees under certain circumstances.
– A prohibition on employers deducting credit card transaction charges from an employee’s tip left on a credit card.
– A requirement for employers to educate patrons on the employer’s use of service charges, clarifying that service charges are not gratuities for tipped employees.
This proposed 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.
The proposed regulations will be published in the Pennsylvania Bulletin on Saturday, Nov. 20, which starts a 30-day public comment period. L&I will review any comments submitted by the public, the General Assembly and the IRRC before submitting a final form regulation. A public hearing and review by legislative committees will precede a final decision by the IRRC. This process will take several months.
