PA Minimum Wage Changes for Tipped and Overtime Workers
On August 5, 2022, changes to Pennsylvania’s Minimum Wage Act took effect as part of Governor Wolf’s broader worker protection agenda. The new regulations that were added, update how employers pay tipped workers and ensure that salaried employees with shifting schedules are properly compensated for overtime. The goal of the changes is to protect wages earned by workers across the commonwealth and to level the playing field for employers competing in the labor market.
Below is a summary of the key points in the updated regulations.
Definition of “Tipped Employee” Updated
The definition of “tipped employee” has not been updated since 1977 for adjusted inflation. The change will increase 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.
Employer Tip Credit Aligned with Federal Regulatory Update
In alignment with a recent federal regulatory update, employers can take tip credit under certain conditions such as the 80/20 rule, which is when an employee spends at least 80% of their time on duties that directly generate tips.
Tip Pooling Aligned with Federal Regulatory Update
In alignment with a recent federal regulatory update, tip pooling is allowed among employees but excludes managers, supervisors and business owners.
Deducting Credit and Non-Cash Payment Transaction Fees Prohibited
Employers will be prohibited from deducting credit card and non-cash payment processing transactions fees from an employee’s tip left with a credit card or non-cash method of payment.
Automatic Service Charges Clarification Required
Employers are required to clarify that automatic service charges are not gratuities for tipped employees.
Salaried Employees Being Compensated for Overtime
The regulation also updated the definition of “regular rate” for salaried employees whose overtime pay is determined by the fluctuation workweek method. stating that for the purpose of overtime calculations, the regular rate is based on a 40-hour work week. These updates do not change overtime compensation for hourly workers.