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Pennsylvania’s minimum-wage and tip regulations change on Friday. What will it look like?

Pennsylvania’s tip regulations and minimum wage for tipped workers change on Friday for the first time since 1977.

After 10 years, Floew Wright decided she’s had enough of the service industry. A bartender at Wissahickon Bar & Bistro, the mother of five quit her job Wednesday.

“You almost have to cater to other people’s feelings before yourself, which is OK because that’s just what you sign up for when you’re a bartender and a server,” she said.

What she can no longer take is the treatment of service workers while also making little money and having to rely on tips to make a living wage.

“It wasn’t worth selling my soul,” the Northeast Philadelphia resident said.

Unlike in many industries, how much bartenders, servers, and others in the service industry take home depends on the generosity of strangers.

New legislation from the Department of Labor and Industry is hoping to address and update regulations to further protect workers like Wright.

Such changes include preventing businesses from deducting credit card fees from employee tips, how hourly wages are determined, and updates in how tips can be pooled and shared.

What are the new regulations?

Going into effect on Friday, Aug. 5, the new regulations update old laws regarding tipped workers, which have not been touched since 1977.

“Our regulations sometimes are a bit unclear or silent on certain areas and I think that these updates provide greater clarity to the business community and to workers who are being impacted by them,” said Pennsylvania Department of Labor & Industry Secretary Jennifer Berrier.

She noted that a lot has changed in the 45 years since the rules were last updated and recent “labor tightness” due to the pandemic were factors in why this is happening now. The new rules are part of a Senate bill introduced in the 2021-22 session sponsored by Sen. Christine Tartaglione (D., Philadelphia).

  • For credit card and other noncash tips, Pennsylvania employers will no longer be allowed to deduct processing fees (anywhere from 1.5% to 3.5% depending on a number of factors) often associated with using a card from an employee’s tips — those fees are the responsibility of employers. That full amount is employees’ to keep. For example, if a customer tips $5 on a bill, that total amount goes to them.

  • Employers must disclose that any automatic gratuities are not tips for employees and must provide a space on receipts to directly tip employees. Berrier noted that when she worked in catering, parties often believed that gratuity was going directly to servers and others working events. “A lot of the times that’s pocketed by the caterer,” she said. “This regulation requires that the businesses be transparent with customers.” For example, some restaurants tack an automatic 20% gratuity on parties over a certain size. They must now disclose that percentage is an operational fee that goes to the business, not the server.

  • The definition of a tipped employee will also be updated. Employees will earn at least a minimum wage of $7.25, according to the Pennsylvania Minimum Wage Act. If a person earns at least $135 in tips a month, an employer may lower their hourly wage to $2.83, as long the addition of tips brings the hourly total up to at least $7.25. Under the old rules, once employees reached $30 on top of their hourly wage, their employer could reduce their wages to $2.83.

  • The new regulations also enact an 80/20 rule for employees. This means that in order to qualify for that wage reduction to as low as $2.83, employees have to spend 80% of their time a week doing work that would earn them tips. Otherwise, their wages cannot be reduced. For example, if a bartender spends 80% of their time a week making drinks and speaking to customers, once their base pay and tips pass the $135 threshold, their rate can be reduced to $2.83. However, if they spend time coming in to clean the bar, set up tables, and anything that would not earn them tips, and that is more than 20% of their duties a week, they will no longer be subject to that wage change.

  • Tip pooling rules will also be updated to clarify that managers and supervisors are not allowed to participate in tip pools unless they have provided the entire service to a customer. If a manager takes a customer’s order, makes the drink, delivers the drink, and cleans up after the customer leaves, they may take any tips given. However, if they only partially assist (they just take the order, for instance) they would not be allowed to take the tip left by the customer or pool tips with employees.

  • For a full breakdown of the new rules, the Department of Labor and Industry has put together an online guide for businesses and employees. If employees feel they are being underpaid or their employer is breaking any of these rules, there is a reporting process with the department, which would then investigate the business.

Whom are the new regulations for?

“It’s all about providing protections to workers’ pay, ensuring that they get to keep the money that they make, and making sure that these dealings are all transparent,” Berrier said.

She noted that although the Wolf administration would like there to be a $15 minimum wage to further support workers, that is still an uphill battle.

Many businesses are still operating under the $7.25 minimum wage that is currently in place, which is the main reason tipped employees depend so heavily on consumers and their wallets.

That’s part of the reason Robert Ashford pays his employees $15 an hour plus any tips they make.

“Even that is a far cry from a living wage in 2022 with inflation, so all of our staff make tips and service charges on top of that,” said Ashford, who owns Unity Taqueria and the Volstead by Unity in Northwest Philadelphia with his wife, Arielle.

Both restaurants have a mission to build a community for people who are in recovery or recently dealt with the justice system.

He said having a higher wage has also had other advantages. Although their first restaurant, Unity Taqueria, opened in the middle of the pandemic in 2020, they have not had as many staffing issues plaguing so many others.

“We haven’t struggled with labor shortages and all these other things, because I think people, especially in the hospitality and service industries, are tired of not being treated well,” he said.

Is this enough?

“It’s definitely a step in the right direction,” said Alexandra Hunt. “People in the service industry essentially have unstable income because how much you make a week fluctuates with how much the restaurant is able to bring in.”

Hunt is a former service worker who ran for Congress in 2022. She left the service industry in 2017, but the 29-year-old worked at multiple restaurants including the Goat’s Beard and Fox & Hounds Pub.

“There was some sort of calculation made that people in the service industry should not be making over a certain amount,” the East Falls resident said. “And there’s just really no reason [service-industry workers], who are poor working-class individuals, maintain that class status.”

Restaurants and bars are not the only places these new regulations apply.

Germantown resident Jeremy Cole works as a game presenter for Evolution Gaming, an online casino. The 25-year-old has a base pay of $8 and relies heavily on tips.

“You have to be perfect sometimes for someone to tip you,” he said, noting that many times people would play games and not tip him as the presenter.

He said he’s not fully sure exactly if the changes will help as much as simply raising base wages would.

For Wright, her solution is simple: She has to make her own path. “I’m going to be focusing on building up my entrepreneurial businesses,” she said.

She doesn’t blame businesses for the way things are, but after years of not always being treated right as a service worker, it was time for a change.

“It was just not lining up with me growing as a person and wanting to be better and do better for myself and my family,” she said.

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