Pennsylvania Prepares to Tighten Tip Credit Rules

UPDATE: March 21, 2022 - The Pennsylvania Independent Regulatory Review Commission (IRRC) approved the amendments.

UPDATE: May 7, 2022 - The amendments were published in the Pennsylvania Bulletin. They take effect August 5, 2022.

Author: Michael Cardman, Brightmine Legal Editor

February 22, 2022

Pennsylvania employers will soon face additional hurdles if they want to claim a minimum wage tip credit for any of the state's estimated 200,000 tipped employees.

The Pennsylvania Department of Labor & Industry (L&I) recently finalized amendments to the state's tip credit rules that will, if enacted:

  • Increase from $30 to $135 the minimum amount of tips an employee must receive each month before an employer may claim a tip credit;
  • Provide that an employer may claim a tip credit only if an employee spends at least 80% of their workweek performing duties that directly generate tips and if the other duties that the employee performs support the duties that directly generate tips (bringing Pennsylvania's rules in line with recently enacted federal rules, except there is no 30-minute rule);
  • Allow for tip pooling among tipped employees (excluding most managers, supervisors and business owners) under certain circumstances;
  • Prohibit employers from deducting credit card transaction charges from an employee's tip left on a credit card; and
  • Require employers to inform patrons that service charges are not gratuities for tipped employees.

The amendments will be considered by the state's Independent Regulatory Review Commission (IRRC) at its next meeting March 21. If approved by the IRRC, the amendments would then go before the attorney general for a final review. Upon the attorney general's approval, the amendments would take effect 90 days after publication in the Pennsylvania Bulletin.

"The world of work has changed significantly since [Pennsylvania's tip credit regulations] first went into effect in 1977, but tipped workers remain a sizeable and critical segment of Pennsylvania's workforce," L&I Secretary Jennifer Berrier said in a statement. "They are the only workers whose take-home pay ultimately depends on the generosity of their customers and not the obligation of their employer. This proposal to update the Minimum Wage Act regulations aims to establish robust and modernized guardrails to protect tipped workers in the 21st century and ensure consistency for employers."