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Pennsylvania Department of Labor announces changes to tipped worker compensation

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CBS News Philadelphia Live

HARRISBURG, Pa. (CBS) – Tipped workers may see a change in their paychecks soon. The Pennsylvania Department of Labor & Industry announced that, as of Friday, changes to Pennsylvania's Minimum Wage Act will take effect.

Secretary Jennifer Berrier announced that the goal is to protect wages earned by thousands of workers and level the playing field for employers competing in a tight labor market.

The modernized regulations – approved by the Independent Regulatory Review Commission 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"As a former service industry worker, I have seen firsthand how employees can be taken advantage of due to outdated rules and regulations when it comes to how they are paid," said Berrier.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."

The final-form regulation covers five primary areas for tipped workers, including:

  • An update to the definition of "tipped employee," that increases the amount in 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. One of the requirements says the employee must spend at least 80% 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. In most cases, this is 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.

Governor Wolf has called on the Pennsylvania House and Senate to pass bills that would raise Pennsylvania's minimum wage to $12 an hour with a path to $15. The governor also supports the elimination of the $2.83 an hour minimum wage for tipped workers.

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