Heads up, Pennsylvania employers! As of August 5, 2022, the Keystone state implemented new rules related to tipped employees and salaried nonexempt employees. Some of the rules bring the Commonwealth in line with the federal Fair Labor Standards Act. Others are more employee-friendly than federal law.
Here are some important changes to note:
Definition of Tipped Employees: Pennsylvania now defines a tipped employee as someone who regularly receives more than $135 per month in tips (rather than $30+). The minimum cash wage remains at $2.83 per hour as long as the cash wage plus tips equals or exceeds the regular minimum wage of $7.25 per hour.
Credit Card Fees: Employers cannot deduct credit card processing fees (or other related costs) from employees’ tips.
Tip Pools: Employers who require tip pooling must keep a record of the names and positions of all employees who participate in the pool as well as the amount given to each employee. The employer must also provide notification as follows:
- Applicants must be notified in writing that they will be part of a pool at or before offering them the job.
- Employers who initiate a tip pool with current employees must notify them in writing at least one pay period before the pool starts.
Fluctuating Workweek: The new law changes the way Pennsylvania employers must calculate overtime pay for salaried non-exempt employees with fluctuating schedules and provides more protections to employees than the federal law, Employers can no longer use the fluctuating workweek method of determining pay for salaried non-exempt employees. (Remember, simply paying an employee by salary does not make that employee exempt from overtime requirements of the law. The employee’s primary duties must also meet the requirements for exempt status.)
Salaried non-exempt employees must have their regular rate determined by dividing their total weekly pay (including non-discretionary bonuses and commissions paid out during that workweek) by 40 (hours), regardless of how many hours they actually worked. Their overtime rate is then determined by multiplying that number by 1.5. That total is then multiplied by the number of hours worked in excess of 40. Here is the formula from the Pennsylvania Minimum Wage Act: [(Weekly salary + any other remuneration not excluded under 34 Pa. Code § 231.43(a)) ÷ 40 hours] × 1.5 × OT hours = Total Overtime Owed.
Takeaways:
- Employers with tipped employees must:
- Ensure that they only take a tip credit against employees who regularly earn more than $135 in tips per month.
- Stop taking credit card fees out of employees’ tips.
- If using tip pooling, ensure that your notice and recordkeeping practices comply with the new rule.
- All employers must ensure they are properly paying overtime to salaried non-exempt employees who work fluctuating workweeks.
You can find more detailed information about the new rules, including guidance and examples for calculating overtime payments for salaried non-exempt employees, on Pennsylvania’s Department of Labor & Industry website.
If you are an employer with questions about any safety, workers’ compensation, or human resources issue, contact East Coast Risk Management by calling 724-864-8745 or emailing us at hrhelpline@eastcoastrm.com. We will be happy to help!
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