New tip credit rules hit PA restaurant and service industry employers


By: Justin Boron

Pennsylvania has upped the ante on the restaurant industry.  

Earlier this month, new regulations took effect aimed at regulating 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, that increases the amount in tips an employee must receive monthly from $30 to $135 before an employer can reduce an employee’s hourly pay from $7.25 per hour to as low as $2.83 per hour. 
  • 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. 

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

Employers in the service industry should review their policies to ensure compliance with new tip credit rules. For more information on this topic, contact Justin Boron at