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Updated Rules in Pennsylvania

Tipped Worker Rules Now in Effect

As of August 5, 2022, updated rules affecting tipped workers and salaried workers who work a fluctuating work week schedule are in effect. A summary of these regulations can be found below or by accessing our Updated Regulations Presentation. The Minimum Wage Act Regulations can be found on the Pennsylvania Bulletin website at 34 Pa. Code Chapter 231. Minimum Wage.

Credit Card and Other Payment Processing Fees

    • All tips and gratuities paid by credit card or other non-cash method of payment are the property of the employee receiving them.
    • Employers are prohibited from deducting any credit card or other payment processing fees from employees' tips.

Tip Pooling

    • Tip pools including any employee who is paid a tip credited minimum wage (less than $7.25 per hour) may only include individuals in occupations who customarily and regularly receive tips.
    • If all employees are paid at least the state minimum wage or higher, tip pools may include both tipped and non-tipped employees.
    • Managers, supervisors, or employers are prohibited from receiving tips from a tip pool, though they may choose to contribute tips they earned to the tip pool.
    • Managers, supervisors, or employers can only receive tips from patrons if they provide the entire service without assistance.
      • Example 1: A supervisor working at a bar takes a drink order from a patron, makes the drink, delivers the drink, and clears the table when the patron is finished. In this case, the supervisor may keep the entire tip.
      • Example 2: A manager in a restaurant takes food orders and refills some drinks while a tipped employee delivers food to the table and refills drinks. In this case, the manager may not keep any part of the tip.
 

Definition of Tipped Employee

    • For an employer to take a tip credit for an employee's base hourly wage, the employee must earn at least $135 in tips per month.
    • Employers are required to ensure that the base hourly wage plus tips equals at least $7.25 per hour.
    • If a tip-credited employee earns less than $7.25 per hour, including their base hourly wage plus tips, the employer must make up the difference as required by the Pennsylvania Minimum Wage Act so that their hourly earnings (base hourly wage plus tips) equal at least $7.25 per hour.
 

80/20 Rule

    • An employee for whom an employer takes a tip credit cannot spend more than 20 percent of their weekly working hours on duties that do not directly generate tips.
    • Duties that directly generate tips include (but are not limited to) taking orders, serving food and drinks, preparing alcoholic beverages, bussing tables during the meal service, making recommendations, processing payments.
    • Duties that do not generate tips but that are directly related to duties that generate tips include (but are not limited to) preparing tabletop condiments, wrapping silverware, refilling napkin holders. Note: these tasks may be directly related if done for an existing customer. 
    • Duties that do not generate tips and are not directly related to duties that generate tips include (but are not limited to) painting, taking inventory of backroom supplies, ordering supplies, scheduling, cleaning bathrooms.
 

Service Fees

    • Providers of banquets, special function, or package deals must provide patrons with contracts and/or bills with separate lines for automatic administrative or service fees that cover operational costs and for gratuities or tips intended by the patron to go to the employee who provided service.
      • Example: A business provides banquet services and includes an 18% service charge. The bill should have separate lines for the 18% service charge and for the patron to provide a tip or gratuity if they so desire.

 

Overtime Rules

Federal Overtime Rule For Salary Employees is in Effect

As part of the 2021-2022 budget package, Act 70 became law on July 9, 2021, which amended the Administrative Code (P.L. 177, No. 175) to abrogate sections 231.82, 231.83, and 231.84 from the regulations for the PA Minimum Wage Act. Effectively, this means that unless future regulations are proposed and approved, the Bureau is unable to enforce provisions of the executive, administrative, or professional exemptions from the Pennsylvania Minimum Wage Act.

Federal regulations regarding exemptions for executive, administrative, and professional employees from overtime remain in effect. The United States Department of Labor (USDOL) published its revised final regulations concerning its overtime requirements under the FLSA on September 24, 2019. (29 CFR 541). The update in federal regulation included raising the salary threshold from $455 to its current level of $684 weekly (equivalent to $35,568 annually).

When there are differences between state and federal law or regulations, an employer should follow the law or regulation which provides the most protection to workers. Therefore, despite the changes made to the Pennsylvania overtime regulation in the 2021-2022 budget by Act 70, you should consult with the United States Department of Labor's Wage and Hour Division (WHD) at 1-866-487-9243 or www.dol.gov to learn more about their regulations on salaried employees.
 

Federal Overtime Rule (effective January 1, 2020)

An employee is entitled to at least minimum wage and overtime pay at time and a half for all hours worked over 40 hours per week. However, the federal Fair Labor Standards Act (FLSA) does not require overtime pay for "any employee engaged in a bona-fide executive, administrative, or professional capacity" who is paid on a salaried basis instead of an hourly wage and meets the minimum salary threshold defined in federal regulations. (29 U.S.C. § 213a(1).

The United States Department of Labor (USDOL) published its revised final regulations concerning its overtime requirements under the FLSA on September 24, 2019. (29 CFR 541). The new federal regulations took effect on January 1, 2020.

The update to federal regulation includes:

    • raising the "standard salary level" from the currently enforced level of $455 to $684 per week (equivalent to $35,568 per year for a full-year worker); and
    • allowing employers to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level. 

New regulations that update the definition of "regular rate" [34 Pa Code § 231.43. Regular rate] for salaried employees whose overtime pay is determined by the fluctuating workweek method will take effect August 5, 2022. These regulations clarify that for the purpose of calculating overtime the regular rate is based on a 40-hour work week.  Please see the overtime FAQs and examples further down this website for more information.


​Tipped Work FAQs



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​Credit Card Deduction

​Tip Pooling

​Definition of Tipped Employee

​Service Fees

​80/20 Rule


Overtime FAQs



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Examples of Overtime Pay Calculations for Employees Who Work a Fluctuating Work Week

Information

The USDOL provides information on its overtime requirements.