STATE COLLEGE, Pa. (WTAJ) — New changes to the Pennsylvania Minimum Wage Act officially go into effect on August 5.

This includes a change in the amount of money a person must receive in a month to be considered a tipped employee.

“Currently, it’s $30 per month in tips to be considered a tipped worker,” said Bryan Smolock, the Director of the Bureau of Labor Law Compliance for the PA Department of Labor & Industry. “That changes to $135 as of August the fifth.”

Once an employee hits $135 in tips, their employer can reduce their hourly pay from $7.25 per hour to as low as $2.83 per hour. Smolock said this is the first change to the definition of a tipped employee since the regulations first went into effect in 1977.

“It was time to modernize and come into some form of agreement with the federal government as well,” Smolock said.

The changes will cover four additional primary areas for tipped workers:

  • 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. 

The changes will also clarify that for the purpose of calculating overtime for salaried employees whose overtime pay is determined by the fluctuating work week method, the regular work week rate is based on a 40-hour work week.

“Previously, nothing addressed whether or not money could be taken from that credit card tip to pay for the credit card transaction fee,” Smolock said. “These regulations now stop that and state ‘No, the credit card tip in full needs to go to the tipped employee.'”

Many businesses in State College said the changes to the definition of a tipped employee won’t affect their workers, with $135 in tips per month considered a low amount for their employees.

“With the steady business that you do in a college town, our employees seem to be doing pretty well with tips,” Owner of Cafe 210 West JR Mangan said. “I think the state is going in the right direction with inflation and gas prices. Everybody’s gonna need to make a little bit more money to get by.”

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Even with the criticism, the Department of Labor and Industry believes the changes will still be felt throughout the state.

“This will affect many restaurants in locations that are not in larger metropolitan areas, for example,” Smolock said. “So, more rural restaurants or locations possibly where servers make less in tips per month.”