Pay Changes For Tipped Workers Take Effect Today

The approved changes for tipped workers have gone into effect today, August 5th. These changes cover five primary areas for tipped workers that make adjustments to the previously outdated regulations.

According to an official release, the Pennsylvania Department of Labor & Industry (L&I) Secretary, Jennifer Berrier, announced that changes to regulations in Pennsylvania’s Minimum Wage Act take effect today with the goal of protecting wages earned by thousands of workers across the commonwealth and leveling the playing field for employers competing in a tight labor market.

The modernized regulations – approved by the Independent Regulatory Review Commission (IRRC) in March and by Attorney General Josh Shapiro’s office shortly after – update how employers pay tipped workers and ensure that salaried employees with fluctuating schedules are appropriately compensated for overtime.

“As a former service industry worker, I have seen firsthand how employees can be taken advantage of due to outdated rules and regulations when it comes to how they are paid,” said Secretary Berrier.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 final-form regulation covers five primary areas for tipped workers, including: 

  • An update to the definition of “tipped employee,” adjusted for inflation since 1977, increases the amount of 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.

It’s important to note that these updates do not change overtime compensation regulations for hourly workers.