New Rules in Pennsylvania for Tipped Employees Just Went Into Effect

How They Affect You

Back in May, we reported on new rules for tipped employees in Pennsylvania that were scheduled to go into effect. Those rules just came into effect on August 5, 2022—an unbelievable 45 years after protections for tipped employees were first enacted.

Here’s what’s in the law, and how it’s expected to affect tipped employees in Pennsylvania.

It’s Now Unlawful To Take Deductions From Your Tips via Credit Card.

It used to be that if a customer paid for their meal and your tip via credit card, your employer could deduct payment processing fees from your tip. That is now unlawful.

From now on, all gratuities you receive from a credit card payment—or any other type of non-cash payment—belong to you. Your employer can’t deduct processing fees from your tips.

A Rise in the Tip Credit Threshold. 

Employers are allowed to pay employees less than the minimum wage if their tips raise their pay to at least the minimum wage every month. This is called a “tip credit.”

Previously, employers could get away with paying employees as little as $2.83 per hour as long as the employee made at least $30 a month in tips. That was a very low bar.

Under the new rules, the employee has to make at least $135 in tips per month before the employer can take the tip credit. And if the employee earns less than $7.25 per hour on both salary and tips, the employer has to make up the difference.

New Rules Around Tip Pooling.

Tip pooling involves combining employee tips and redistributing them at the end of the night—usually by the employer. Prior to the new law, this was not addressed in laws governing tipped employees. The new law changes that.

Under the new rules, if the tip pool includes any tipped employees being paid less than minimum wage because of the tip credit, the tip pool can only include people working in jobs where they regularly receive tips.

If all employees in the tip pool are paid at least the state minimum wage, then tipped and non-tipped employees can both be included.

No matter which it is, however, supervisors, managers, and employers are forbidden from taking money from a tip pool—although they are allowed to contribute their own tips to the pool if they wish.

New Rules About When Managers and Supervisors Can Receive Tips.  

Under the new rules, managers, supervisors and employers can only take tips for services they provide without assistance from someone else. For instance, a supervisor working at a bar can take an entire tip from a patron if they perform all the work involved with the order, such as taking down the order, making and serving the drink, and bussing the table.

If the manager only performs part of the task with help from a tipped employee, the manager is not entitled to any part of the tip.

A Stronger Definition of the 80/20 Rule.

Prior to the Trump administration, federal laws said that employers could not take a tip credit for any time an employee spent doing non-tipped tasks, such as cleaning bathrooms or setting up the dining room, if those tasks took up more than 20% of the employee’s time at work.

But during the Trump and Biden administration, this rule has been periodically eliminated and then reinstated, creating significant confusion. The 80/20 rule is now state law in Pennsylvania no matter what happens federally, eliminating that confusion.

Service Fees for Banquets and Functions

Under current laws, companies that offer banquets, functions and package deals must print contracts and bills with separate lines for service fees and tips.

Prior to this, a banquet or function provider could print a bill that includes, for instance, an “18% service charge” that was just an operational charge. The problem was that often, customers would believe that was the tip—so they would fail to tip the server.

Under the new rule, these charges will be listed with more transparency so that customers have the opportunity to tip servers.

Questions? Talk to a Knowledgeable Pennsylvania Employment Attorney

If you have questions about how the new laws for tipped employees may affect you, give us a call. We can help you sort through the confusion and determine what protections the new law affords you and your co-workers.

Call us at 267-273-1054 or email us at murphy@phillyemploymentlawyer.com for a free, confidential consultation today.

The information provided here does not constitute legal advice. It is intended for general purposes only. If you have questions about a specific legal issue, you should speak to an attorney.