Commission approves base pay increases for tipped workers in Pennsylvania

The Chocolate Avenue Grill

A server tends to customers at Chocolate Avenue Grill, located at 114 W. Chocolate Ave. in Derry Township in May 2021. File photo by Dan Gleiter | dgleiter@pennlive.com

A state regulatory commission Monday gave a green light to change how tipped workers in Pennsylvania are paid, handing Gov. Tom Wolf leverage in his efforts to raise the state’s minimum wage.

The five-member Independent Regulatory Review Commission voted unanimously to approve a Department of Labor & Industry regulation to raise pay for those who receive a “tipped minimum wage” including restaurant servers.

The approval is viewed as win for Wolf. The governor has been pushing for workplace improvements in Pennsylvania including overall higher minimum wages, despite resistance by Republicans. Taking the proposal to the commission allowed the Wolf administration to circumvent the legislative process.

“Our embarrassingly low minimum wage has widespread effects that go beyond the unfairly paid workers and their families,” Wolf said in a prepared statement. “When people earn a decent wage, they can contribute to the economic health of their communities and the commonwealth. When they don’t earn enough to pay for bare necessities, they are forced to rely on public benefits.”

The commission’s decision could revise a decade’s old rule dating to 1977 about how employers pay tipped workers. Employers in Pennsylvania must pay at least $2.83 an hour, a level that bumps up to minimum wage if an employee’s tips don’t meet a certain threshold.

Under the regulation, the amount in tips a worker must receive monthly would increase from $30 to $135 before the employer can reduce hourly pay from the state’s minimum wage of $7.25 per hour to the $2.83 per hour rate.

The regulation targets other revisions such as how overtime for salaried employees with fluctuating workweek schedules is compensated. Additionally, it clarifies service charges for banquets and events and prevents employers from subtracting credit card transaction fees from workers’ tips.

The regulations will be submitted to the Office of Attorney General for review. Upon approval, the updates will go into effect in 90 days.

While commissioner John J. Soroko voted “yes” for the updates, he said he had misgivings related to business owners.

“Coming out of the pandemic with many restaurants being small family businesses, I have to say maybe this is the case of the right idea at the wrong time,” Soroko said.

Many Republican lawmakers have opposed Wolf’s effort to raise the minimum wage, arguing it could hurt small businesses and cost some workers their jobs. Some said it would be unfair after many businesses have been battered during the pandemic.

Wolf wants to raise Pennsylvania’s minimum wage of $12 per hour and get the state on a path to $15 per hour by 2027. Pennsylvania’s minimum wage has been set to the federal minimum wage of $7.25 an hour since 2009, when Congress last increased it.

Pennsylvania Restaurant & Lodging Association CEO and President John Longstreet said the state’s hospitality industry favors the tipped wage adjustment.

“We view this as simply contemporizing the program to today’s wages,” Longstreet said.

The following areas for tipped workers are covered under the proposal:

  • Alignment with a recent federal regulatory update governing employer tip credits to allow employers to take a tip credit under certain conditions, including that the employee spends at least 80 percent of their time on duties that directly generate tips, commonly known as the 80/20 rule.
  • Alignment with a recent federal regulatory update to allow for tip pooling among employees but in most cases excluding managers, supervisors, and business owners.
  • A prohibition on employers deducting credit card and other non-cash payment processing transaction fees from an employee’s tip left with a credit card or other non-cash method of payment.
  • A requirement for employers to clarify that automatic service charges are not gratuities for tipped employees.

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