Restaurants and taverns are reopening with the economy. Tipped workers in those business, fortunately, also have greater wage rights.
On August 5, 2022, tipped employees in Pennsylvania received additional employment law protections. These protections are important because employers can reduce tipped employees’ wages from $7.25 to the tipped credit of $2.83 per hour.
An employee meets the legal definition of a tipped employee if they earn at least $135.00 per month in tips.
Employers must assure that their base hourly wage and tips equals at least $7.25 per hour. If the base hourly wage and tips is below $7.25 per hour, employers have to make up the difference under Pennsylvania’s Minimum Wage Act.
A business that provides banquets, special functions or package deals must provide contracts or bills to customers containing separate lines for automatic administrative or service fees. These fees should cover operational costs for tips or gratuities to workers who provided services at the event.
Employees own all tips and gratuities paid to them by credit card or other non-cash methods. Employers may not deduct credit card or processing fees from employee tips.
Tip pools include employees who are paid the tip credited minimum wage, which is below $7.25 per hour, and who regularly and customarily receive tips. If all employees are paid at least the regular tipped wage of $7.25 per hour, tip pools are for employees who get tips and those who do not.
Managers, supervisors or employers cannot receive tips from a tip pool but may contribute any tips they receive into that pool. These workers may also receive tips from customers if they provided the entire service without assistance from other employees.
The 80/20 rule
If an employer is taking a tip credit for an employee, that employee cannot spend more than 20% of their time for the week in tasks that do not directly generate tips.
Duties that directly generate tips include taking orders, serving food and beverages, making alcoholic beverages, bussing tables as part of meal service, making recommendations and payment processing.
Duties that do not generate tips but are directly related to tip-generating duties include condiment preparation for tabletops, silverware wrapping and refilling napkin holders. These tasks, however, may constitute tip duties if these are performed for an existing patron.
Tasks that do not generate tips and are unrelated to tip-generating duties include painting, taking inventory of supplies in the backroom, placing orders for supplies, scheduling and cleaning restrooms.
Attorneys can help assure that tipped employees are receiving legal wages and assist employers with compliance. They can also help them commence actions for wage violations.