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Pennsylvania Tip Credit and Overtime Amendments Take Effect

On May 7, 2022 the Pennsylvania Department of Labor & Industry (L & I) announced the publication in the Pennsylvania Bulletin of final form regulations that amend Pennsylvania’s Minimum Wage Act rules by updating how employers pay tipped workers and ensuring that salaried employees with fluctuating schedules are appropriately compensated for overtime.

Tipped Workers

Effective August 5, 2022, Pennsylvania’s tip credit regulations are amended to:

  • Increase from $30 to $135 the amount of tips an employee must receive each month before an employer may claim a tip credit;
  • Allow employers to claim a tip credit only if employees spend at least 80 percent of their workweek performing duties that directly generate tips and if other duties that the employee performs support the duties that directly generate tips;
  • Incorporating the federal standards related to tip pooling (see 29 CFR 531.54) by requiring affected employees to receive written notice of tip pooling arrangements at or before the time employers make an employment offer or at least one pay period before the tip pooling arrangement takes effect;
  • Prohibit employers from deducting transaction fees from any tips left on a credit card;
  • Require employers to notify patrons about any service charges for banquets or package deals; and
  • Require employers that implement tip pools to keep records of the names and position of each participant in the tip pool and the amount distributed to each of them.

Overtime

In addition, Pennsylvania’s overtime regulations are amended to provide that the regular rate of pay for salaried employees who are not exempt from overtime is the amount of remuneration (other than payments that may be excluded from the regular rate) divided by 40 hours (rather than by all hours worked in a workweek). As a result, the fluctuating workweek method of calculating overtime pay allowed under federal law is not permitted under Pennsylvania law.

Next Steps for Employers

Employers should review and adjust their payroll practices, update any correlating written policies or procedures and ensure these changes are communicated to affected employees.

In addition, multistate employers must also be mindful of applicable state laws as other states also have laws about tipped workers and overtime calculations which may differ from Pennsylvania law.

L & I intends to host webinars for business owners and other stakeholders to learn about the updated regulations and ask questions. The webinars are scheduled for 10 a.m. on Tuesday, July 12, and Tuesday, July 19. Information about how to register for the webinars will be posted to L & I’s website.

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