The Pennsylvania Department of Labor & Industry announced its submission of final-form 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 department has submitted its proposal to the Independent Regulatory Review Commission in advance of the IRRC’s March 21 meeting.
“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 final-form regulation covers five primary areas for tipped workers, including:
– 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.
– Alignment with 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.
– Alignment with a recent federal regulatory update to 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 left with a credit card or other non-cash method of payment.
– A requirement for employers to clarify that automatic service charges are not gratuities for tipped employees.
This final-form 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.
