Key Takeaways

• The Pennsylvania Department of Labor has adopted new rules to the Minimum Wage Act affecting tipped and salaried employees who work a fluctuating workweek to insure those employees receive proper compensation for overtime.

• Effective August 5, 2022, employers are prohibited from deducting credit card or other payment “processing fees” from employees’ tips.

• A manager or supervisor may not receive tips from a tip pool.

• Employers should undertake weekly calculations to insure overtime payments are being made for employees who work a fluctuating workweek.

On August 5, 2022, prior legislation signed by Gov. Wolf took effect, providing more protections to Pennsylvania workers. Specifically, it includes amendments to the Pennsylvania Minimum Wage Act at 34 Pa. Code Chapter 231.

The new regulations prohibit employers from taking credit card fees from tipped employees. Also, managers and supervisors cannot receive tips from the tip pools of non-managers and/or supervisors. In addition, an employer cannot take a tip credit from any employee that makes less than $135 per month in tips. This amount is up significantly from the previous amount of $30 per month. Employers must insure that all workers receive a minimum wage of $7.25 per hour.

Pennsylvania has also adopted the 80/20 rule used in the federal legislation. Under the rule, a tipped employee must not spend more than 20% of a workweek performing tasks that do not generate tips.

The new rules also clarify the definition of “regular rate” for those employees who enter into a fluctuating workweek agreement with their employers. The new definition states that the regular rate “is based on the regular, 40-hour-workweek and not the total hours worked including overtime, may be irregular and inconsistent from week to week.”

Per the Department of Labor, these new rules do not change overtime compensation regulations for hourly workers. However, Gov. Wolf is pushing for legislation that would raise the minimum wage to $12 an hour with a conduit to $15 an hour.

Employers in the service industry and other tipped industries should review their current policies to insure they are complying with the new regulations. Those employers who have employees working on a fluctuating workweek should also insure they are using the 40 hour definition as opposed to an average of the hours worked.

If you have any questions about these changes or how they impact your business, please contact:

• Angela A. Cronk
• Kristin Klein Wheaton
• Caroline J. Berdzik
• Or another member of the Employment and Labor group