New Protections for Tipped Employees in Pennsylvania

Your Rights and Protections Are About To Get Stronger

In the fall of 2021, the Pennsylvania Department of Labor and Industry proposed a much-needed update to rules protecting tipped employees in the state. Recently, the Attorney General approved the update—and it will go into effect by August 5, 2022.

The new regulations represent sweeping changes that will strengthen protections for tipped employees in the state. Here’s what’s included.

A Rise in the Amount You Earn Before Your Employer Can Take a Tip Credit 

Under the current law, employers are allowed to pay tipped employees as little as $2.83 an hour—less than the state minimum wage—as long as the employees make at least $30 a month in tips. This is called a tip credit.

This number has remained unchanged since 1998, and it clearly needs an update. In the new law, tipped employees need to earn at least $135 a month in tips before the employer can take the tip credit and pay less than the minimum wage.

Stability for Rules That Define a Tipped Employee

Prior to the Trump administration, the law at the federal level stated that employers could not take a tip credit (and pay employees less than the minimum wage) for time an employee spent performing non-tipped tasks, such as cleaning the dining room or polishing silverware, if those tasks took more than 20% of the employee’s time. This was called the “80/20” rule.

Under the Trump and Biden administrations, the 80/20 rule has been rescinded and then reinstated with various changes, creating uncertainty in the industry.

In these new regulations, the 80/20 rule will be state law in Pennsylvania regardless of what happens at the federal level, allowing for greater stability and consistency for employers and employees alike.

Formal Rules on Tip Pooling

Tip pooling—a process by which tips are combined and redistributed among employees, usually by the employer—is now formally addressed in the law.

Under the new rules, Pennsylvania will follow federal rules that allow tipped employees to pool tips and share with workers who typically don’t get tips, as long as the employer does not use that as a justification to take a tip credit for the non-tipped employees’ wages.

In addition, while managers and supervisors are allowed to keep tips paid directly to them, they not allowed to participate in the tip pool. The regulation follows the definitions of “manager” and “supervisor” set out at the federal level.

It’s Now Unlawful To Take Transactional Fees Out of Tips

At the federal level, employers are allowed to take the cost of transactional fees for credit card payments out of an employee’s tips. So if a customer pays for their meal with a credit card and tips the server as part of that payment, the credit card fees may come out of the server’s tip.

Under the new Pennsylvania rules, however, this is not allowed.

Questions About Your Rights as a Tipped Employee? Speak With an Employment Attorney 

If you have questions about your rights as a tipped employee, a knowledgeable Pennsylvania employment lawyer can answer your questions—and, if needed, determine if your employer is violating your rights.

Call us at 267-273-1054 or email us at murphy@phillyemploymentlawyer.com for a free, confidential consultation today.

The information provided here does not constitute legal advice. It is intended for general purposes only. If you have questions about a specific legal issue, you should speak to an attorney.