Wolf Administration Proposes Changes to Tipped Worker Regulation

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On Friday, November 19, Pennsylvania Department of Labor & Industry (L&I) Secretary Jennifer Berrier announced proposed regulations to update rules about how employers pay tipped workers.

The department’s proposed regulation covers five primary areas for tipped workers, including:

  • An update to the definition of “tipped employee,” adjusted for inflation since 1977, 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.
  • Codification of a recent federal regulatory update governing employer tip credits to allow employers to take a tip credit under certain conditions, including that the employee spends at least 80 percent of their time on duties that directly generate tips, commonly known as the 80/20 rule.
  • An update to allow for tip pooling among tipped employees under certain circumstances.
  • A prohibition on employers deducting credit card transaction charges from an employee’s tip left on a credit card.
  • A requirement for employers to educate patrons on the employer’s use of service charges, clarifying that service charges are not gratuities for tipped employees.

This proposed 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. 

The proposed regulation was published in the Pennsylvania Bulletin on Saturday, Nov. 20, which starts a  30-day public comment period. Comments can be emailed to the Independent Regulatory Review Commission at [email protected].  Reference Department of Labor and Industry, Regulation #12-114: Minimum Wage, IRRC Number 3322. L&I will review any comments submitted by the public, the General Assembly and the IRRC before submitting a final form regulation. A public hearing and review by legislative committees will precede a final decision by the IRRC. This process will take several months.