Pennsylvania Tipped Worker and Overtime Rules Take Effect August 5, 2022

On August 5, 2022, updated rules affecting tipped workers and salaried workers who work a fluctuating work schedule will go into effect. Below is a summary of these regulations:

  • 80/20 Rule: An employee for whom an employer takes a tip credit cannot spend more than 20 percent of their weekly working hours on duties that do not directly generate tips.
    • Duties that directly generate tips include (but are not limited to) taking orders, serving food and drinks, preparing alcoholic beverages, bussing tables during the meal service, making recommendations and processing payments.
  • Tip pooling: If all employees are paid at least the state minimum wage or higher, tip pools may include both tipped and non-tipped employees.
    • Managers, supervisors or employers are prohibited from receiving tips from a tip pool, though they may choose to contribute tips they earned to the tip pool.
  • Credit card fees and the tip credit: All tips and gratuities paid by credit card or other non-cash method of payment are the property of the employee receiving them.
    • Employers are prohibited from deducting any credit card or other payment processing fees from employees’ tips.
  • Service charge disclosure to customers: Puts in place a requirement for employers to clarify that automatic service charges are not gratuities for tipped employees.
  • Overtime regulations: The regulation updates the definition of “regular rate” for salaried employees whose overtime pay is determined by a fluctuating workweek, clarifying that for the purpose of calculating overtime, the “regular rate” is based on a 40-hour work week.
  • Fluctuating workweek: The regulation will also codify the Pennsylvania Supreme Court’s holding in Chevalier. v. General Nutrition Centers, 2019 U.S. Dist. LEXIS 6521 (Pa. 2019) and will eliminate the right of Pennsylvania employers to utilize the fluctuating work week for salaried, non-exempt employees.
    • Under the fluctuating workweek approach (permitted under federal law), the overtime premium of a salaried, non-exempt employee is paid on a half-time basis, as compared to the typical requirement that overtime premiums be paid on a time and a half basis for hourly, non-exempt employees.

A copy of the updated regulations can be found here: https://www.dli.pa.gov/Individuals/Labor-Management-Relations/llc/minimum-wage/Documents/BLLC-Updated-Regulations.pdf

For more information, please contact Lisa Scidurlo at Lisa.Scidurlo@stevenslee.com, Joseph Hofmann at Joseph.Hofmann@stevenslee.com, Theresa Zechman at Theresa.Zechman@stevenslee.com, Daniel Sobol at Daniel.Sobol@stevenslee.com, Rachelle Highland at Rachelle.Highland@stevenslee.com or reach out to the Stevens & Lee attorney with whom you regularly work.

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