Proposed Changes for Tipped Workers and Overtime Rules Could Impact PA Businesses

The Pennsylvania Chamber of Business and Industry submitted comments to the PA Department of Labor & Industry regarding a proposed rule that would change regulations governing tipped employees and would clarify how the base hourly rate for overtime of salaried employees is calculated. In November, the state denied a request from the PA Chamber and other statewide associations to extend the public comment period on the proposed change.

Among the proposals impacting the restaurant industry is to require that an employee classified as a tipped employee can spend no more than 20 percent of their workweek performing duties that do not generate tips. The Department emphasizes in its proposal that this rule would align Pennsylvania with federal law; however, since the so-called “80/20 rule” proposed by the U.S. Department of Labor has been challenged in court, the PA Chamber urged the state to wait until the federal change is resolved. Similarly, the Department proposes adopting a federal standard limiting tip pooling to employees who spend at least 80 percent of a daily shift performing duties that generate tips. However, under federal law, employers who pay employees the full minimum wage and do not utilize the tip credit may establish a tip pool that includes back-of-house employees, an option the PA DOL does not appear to allow, creating inconsistency.

Among other provisions, the PA Chamber advocated for the state to adopt the federal model of the fluctuating work week wage payment policy and pointed out that the regulation does not address how to calculate overtime on commissions and bonuses for hourly employees.

Relatedly, the PA Chamber also submitted a response  to a request from the Department for feedback related to the definition of ‘Hours Worked’, a particularly unclear aspect of the PA Minimum Wage Act.  The PA Chamber emphasized that one of the most common employer frustrations in the area of workplace/employment law are federal and states mandates that are similar in purpose but different in detail, complicating compliance and leaving employers vulnerable to committing inadvertent violations.

Accordingly, the comments urged adopting the federal definition of Hours Worked and incorporating the Fair Labor Standards Act definition by reference, including the Portal-to-Portal Act and the Employee Commuting Flexibility Act. A clear, consistent definition would help alleviate confusion for both employers and employees and could be part of a broader agenda to make Pennsylvania more competitive. It would also align Pennsylvania law most other states.

Alternatively, the PA Chamber suggested that, should the Department conclude that the federal definition for Hours Worked is insufficient, the Department should still incorporate the FLSA definition and then identify the specific areas in which Pennsylvania’s definition deviates. While Pennsylvania employers would still be required to consult both federal and state Hours Worked definitions, they at least would have the guidance necessary to craft workplace policies with confidence that they are compliant.


Founded in 1916, the Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association, with its membership comprising businesses of all sizes and across all industry sectors. The PA Chamber is The Statewide Voice of BusinessTM.