New Tipped Worker Rules for Pennsylvania Employers

Earlier this year, the Pennsylvania Department of Labor and Industry issued its final rule affecting tipped workers which goes into effect on August 5, 2022. Below is a summary of the new regulations and how they may affect your workforce.

1.     Increase threshold to qualify as “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. Previously, this was threshold was $30 per month.

2.     Incorporation of “tip pooling” provisions of the federal regulations: Pennsylvania law regarding tip pooling will not completely align with federal law. This means that when employers take a tip credit, the tip pools may only include employees who customarily and regularly receive tips. When an employer does not take a tip credit, the tip pool can include workers who do not customarily and regularly receive tips, i.e., cooks, dishwashers, etc. Managers and supervisors are prohibited from receiving tips from a tip pool and can only receive tips from patrons if they provide the entire service without assistance.

3.     Adopting the federal 80/20 rule: An employer cannot take a tip credit for an employee who spends more than 20% of his/her weekly working hours on duties that do not directly generate tips.

4.     Employers prohibited from deducting any credit card or other payment processing fees from employees’ tips: All tips and gratuities paid by credit card or other non-cash method are the property of the employee receiving them. Employees cannot deduct any fees from tips paid via credit card or similar non-cash payments methods.

5.     Employers must maintain records of participants in a tip pool: Employers must record the names and job titles of each employee in a tip pool and the amount distributed to each employee.

6.     Service Charges must be separate from tip or gratuity: Providers of banquets, special functions, or package deals must provide patrons with a separate line for automatic service charges and for tips or gratuities intended by the patron to go to the employee who provided service. Employers who levy a service charge must notify patrons of the charge in the contract or on any menu provided to the patron stating what the charge is for and that it does not include a tip to be distributed to the employee providing the service.

For questions about how this might affect your workplace or any other labor and employment law topic, please do not hesitate to contact the attorneys at Hoffman & Hlavac. To stay updated on key labor and employment law developments that affect your workplace, be sure to subscribe to our blog and follow us on social media.