• Wed. Oct 5th, 2022

New Tip Credit Rules Hit Employers in PA’s Restaurant and Service Industry – Employee Benefits and Compensation

ByStephanie M. Akbar

Aug 26, 2022

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Pennsylvania has upped the ante in the restaurant industry.

Earlier this month, new regulations came into force to regulate how employers pay tipped employees in restaurants and other service industry employees.

The regulations include the following:

  • An update to the definition of “tipped employee”, adjusted for inflation since 1977, which increases the amount of tips an employee must receive monthly from $30 to $135 before an employer can reduce an employee’s hourly wage from $7.25 to $2.83. per hour.
  • Harmonization with a recent federal regulatory update governing employer tip credits to allow employers to take tip credit under certain conditions, including that the employee spend at least 80% of their time on tasks that directly generate tips, commonly referred to as the 80/20 rule.

  • Alignment with a recent federal regulatory update to allow tip pooling among employees, but in most cases excluding managers, supervisors and business owners.

  • Employers are prohibited from deducting credit card fees and other non-cash payment processing transaction fees from an employee’s tip left with a credit card or other non-cash payment method.

  • A requirement for employers to clarify that automatic service charges are not gratuities for tipped employees.

For the most part, employers in the employee-tipped space should already have updated their practices to comply with federal law. But there are elements unique to Pennsylvania law that require more of the employer.

Service industry employers should review their policies to ensure compliance with the new tip credit rules.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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