Pa. Minimum Wage Act changes now in effect

Changes to Pennsylvania’s Minimum Wage Act take effect starting Aug. 5. The new regulations update how employers pay tipped workers and ensure that salaried employees with fluctuating schedules are properly compensated for overtime. 

 “As a former service industry worker, I have seen firsthand how employees can be taken advantage of due to outdated rules and regulations when it comes to how they are paid,” said L&I Secretary Jennifer Berrier. “Servers, bartenders, hairstylists, nail techs, bellhops and dozens of other tipped-worker positions rely on the generosity of their customers for their livelihood and deserve regulatory protections that ensure these earned wages are theirs to keep. I know that struggle personally, hoping you earn enough money each shift to make ends meet. These updated regulations not only seek to keep tips in the pockets of workers who rightfully earned them, but to also ensure employers are playing by the same, fair rules.” 

The final-form regulation covers five primary areas for tipped workers, including: 

  • 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 

 This final-form regulation also updates the definition of “regular rate” for salaried employees whose overtime pay is determined by the fluctuating workweek method, clarifying that for the purpose of calculating overtime the regular rate is based on a 40-hour work week. 

The updates do not change overtime compensation regulations for hourly workers. 


Wolf order ties DCED funding for businesses to paid sick leave 


For-profit businesses that receive assistance through the Department of Community and Economic Development will have to offer paid sick leave under an executive order signed by Gov. Tom Wolf on Thursday. 

The order is an addition to a previous executive order by Gov. Wolf that ordered the department to require a minimum wage equal to the state’s minimum wage for government employees. 

It is an effort by the Wolf Administration to tackle the state’s labor shortage and support Pennsylvania workers, Wolf said in a press release. 

With our economy on the comeback, there are so many job openings that people can select the option that is best for their family,” he said. “This is a critical moment for Pennsylvania workers, and it’s time we stop asking why there is a labor shortage and start asking how we can make jobs better. With Pennsylvanians renowned for our work ethic, this is an opportunity to improve jobs in the state, which will attract and retain hardworking people to live here and bring new industries to the commonwealth that want a talented, skilled and dedicated workforce.” 

Along with directing DCED to enforce paid employee sick leave and continue its minimum wage requirements, the order also asks agencies under the Governor’s jurisdiction to review existing programs and program guidelines and consider imposing a minimum-wage requirement for their applicants for state funding. 

The minimum wage for state workers is $13.50 and is set to hit $15 by July 1, 2024, which was part of an executive order signed by Wolf in 2018. 

The order goes on to direct the Pennsylvania Department of Labor & Industry and the Office of Administration to do a feasibility study of implementing Occupational Safety and Health Administration (OSHA) standards throughout state offices.  

All state agencies are required to review and develop processes that ensure that businesses receiving grants are in compliance with Pennsylvania state labor and workforce safety laws. 

“After COVID-19 exposed our workforce to a new set of dangers, it’s all the more important that we update statewide worker protections,” said Sen. Jay Costa. D-Allegheny County during a press conference on Thursday. “In so many industries, they were on the frontlines of COVID exposure without the equipment they needed to keep themselves safe, or the time off to heal if they got sick, let alone paid time off to care for sick loved ones. I’m here today in lockstep with the Governor’s commitment to this issue so that our workforce can thrive here in the Commonwealth.”

Organizations that have violated labor laws, misclassified their workers, owe unemployment compensation back taxes or fail to carry workers’ compensation insurance will be included in a publicly available list through the Department of Labor & Industry, according to the order. 

CVS says it will raise starting pay to $15 per hour, relaxes some hiring requirements

As the debate continues over raising the federal and state minimum wage, CVS Health has become the latest company to announce that it is raising its minimum wage to $15 an hour.

The increase will take effect in July of next year.

The company said in a release that while this is a significant investment, 65% of its employees were already earning more than $15 per hour.

It represents a more than 60% increase in the company’s minimum enterprise hourly wage over a four-year period.

“Attracting and retaining top talent across our businesses is critical as we continue to redefine what it means to meet people’s health needs,” said CVS Health President and CEO Karen S. Lynch. “These wage increases will have a meaningful impact on our colleagues and their families while helping the communities we serve prosper. Today’s announcement is the latest in a series of investments in our people, including bonuses and benefit enhancements throughout the pandemic.”

In addition to boosting wages, CVS Health noted that it is removing other barriers in its hiring. Recently the company eliminated the high school diploma or GED requirement for most entry-level roles, and this year will eliminate the GPA requirement for its university recruitment.

CVS Health is the latest in a number of companies operating in Pennsylvania to announce dramatic increases in wages to attract talent during the current worker shortage.

In May, for example, Sheetz announced it was increasing wages by $2 an hour for all of its 18,000 employees.

The current minimum wage in Pennsylvania is $7.25 per hour.

UPMC Pinnacle increases entry-level wage to $15 an hour

Entry-level positions at UPMC Pinnacle facilities now start at $15 an hour, the Harrisburg-based hospital system announced on Monday.

UPMC Pinnacle first introduced the new starting wage in January at many of its facilities and sites including UPMC Pinnacle Harrisburg, Community Osteopathic, West Shore and UPC Carlisle, Hanover, Lititz and Memorial Hospitals.

The effort is part of a 2021 commitment by UPMC, which was the first health care employer in the commonwealth to commit to a $15 an hour minimum wage according to the system.

Prior to the update, the system’s lowest pay range started at $13.10. The increase affects approximately 9% or 1,060 of UPMC Pinnacle’s employees, according to a UPMC Pinnacle spokesperson.

“We are very proud of our wages, generous benefits and other rewards and of the tens of thousands of jobs at UPMC that have meaning and purpose, and that fulfill an incredibly important mission for the region and the communities that we serve,” said Philip Guarneschelli, president of UPMC Pinnacle. “We review the market each year to ensure that our salary ranges are competitive, and we are committed to rewarding our strong-performing employees with merit increases on an annual basis.”

The system’s benefits offered to all employees include a retirement savings plan with a percentage match, a defined benefit pension plan paid by UPMC, tuition assistance for employees and their families, and more.

UPMC employs over 92,000 people across all of its facilities statewide. The system’s average compensation is $70,600 not including benefits.

The subject of a federally or state mandated $15-an-hour minimum wage has been a hotly debated topic in recent memory.

Earlier this year, Governor Tom Wolf proposed an increase to Pennsylvania’s minimum wage for his sixth time as governor.

In D.C., a provision that would gradually increase the country’s minimum wage to $15 by 2025 was passed by the House as part of President Joe Biden’s COVID-19 relief bill but was stopped in its tracks in the Senate last Thursday.

Gov. Tom Wolf proposes boosting minimum wage to $12 by July

Too many workers are still struggling to get by because Pennsylvania hasn’t raised the minimum wage in more than a decade. The cost of living goes up and Pennsylvanians wait as 29 other states, including all of our neighbors, raised the minimum wage for their workers.”

Gov. Tom Wolf called for Pennsylvania to raise its minimum wage from $7.25 to $12 by the beginning of July.

Wolf has proposed plans to raise the state’s minimum wage, which was last raised in 2009, every year since he took office in 2015. Under his newest plan, the state would raise the minimum wage to $12 an hour on July 1, 2020 and raise that minimum by 50 cents every year until reaching $15 an hour in 2026.

“There’s momentum to finally raise the wage, but momentum in the Capitol doesn’t put food on the table in workers’ homes,” Gov. Wolf said. “Too many workers are still struggling to get by because Pennsylvania hasn’t raised the minimum wage in more than a decade. The cost of living goes up and Pennsylvanians wait as 29 other states, including all of our neighbors, raised the minimum wage for their workers.”

The minimum wage is $10.10 in Maryland, $10 in New Jersey, $8.75 in West Virginia, $8.55 in Ohio.

The increase to $12 in Pennsylvania would affect more than a million Pennsylvanians, and after reaching $15 those workers will generate an additional $300 million in state tax revenue, Wolf said. In addition, the administration says it would take nearly 93,000 adults off Medicaid.

“I’m grateful that Governor Wolf has once again included a living wage for Pennsylvanians as a budget priority,” said Rep. Patty Kim, D-Harrisburg. “We can’t sit back for another year and watch other states lead on minimum wage. We have lagged behind for too long while workers are working longer and bringing home less.”

Opponents of the increase question how a $4.75 jump in the minimum wage would affect small businesses with thin margins. That raise in the minimum wage could be even more harmful to the state’s local restaurants if the tipped credit system is eliminated as the governor has previously proposed, said Alex Halper, director of government affairs for the Pennsylvania Chamber of Business and Industry.

“If the goal for lawmakers is to assist low income Pennsylvanians raising families, there are more targeted and strategic policies that would drive support to those families without triggering a negative impact on family businesses,” Halper said.

Overtime calculation in court crosshairs

In April the Pennsylvania Supreme Court heard arguments in a 2013 lawsuit brought by salaried employees against their employer, General Nutrition Centers.

The dispute centers on the calculation of overtime hours, as workers felt they were entitled to more pay under the Pennsylvania Minimum Wage Act than what they were given under the federal Fair Labor Standards Act.

Between 2009 and 2011, General Nutrition Centers paid its retail managers a fixed weekly salary, based on a fluctuating number of hours worked.

Employees can benefit because they are paid a guaranteed sum each week. And if they work more than 40 hours, they are still eligible for overtime pay for each additional hour, facts acknowledged by both parties in the lawsuit.

However, the two sides split over how to calculate the overtime pay.

General Nutrition Centers, or GNC, started by dividing employees’ weekly salary by the total number of hours worked to come up with an hourly rate.

GNC calculated the overtime pay based on adding half-time – using a multiplier of 0.5 – for the additional hours over 40, instead of time and a half, or 1.5. The company reasoned that employees already were being paid the 1.0 per the FLSA for the hours beyond 40, according to court documents.

The employees felt they were entitled to the full 1.5 for any hours beyond the first 40, in addition to their regular salary (see sidebar, “Doing the math”).

In 2017, Superior Court sided with employees.

Doing the math

Overtime calculations for a fluctuating workweek can be complex. Here is an example given by Ed Easterly, an attorney at Hoffman Hlavac & Easterly in Allentown.

Start with an employee who earns $500 per week and works 50 hours in one week.

Under the federal Fair Labor Standards Act, that employee would get $50 in overtime pay. The employee would have a regular rate of $10 per hour for all 50 hours, plus an extra $5 per hour for the 10 hours of overtime.

Under state law as interpreted by the Pennsylvania Supreme Court, the same employee would get $150 in overtime pay: based on an extra $15 per hour for the 10 hours of overtime.

The court said the company should have used the more generous multiplier of 1.5 to arrive at overtime pay under state law. However, the court also ruled that a fluctuating workweek is legal under state law, as was GNC’s method for calculating the regular pay rate.

Part of the reason calculations can vary is due to a lack of information from state authorities, according to one small-business advocate.

The Pennsylvania Department of Labor and Industry has never clearly defined how to calculate overtime for a fluctuating workweek, according to Gordon Denlinger, state director of the National Federation of Independent Business in Pennsylvania.

“Businesses of all types and sizes have made their best efforts at correct calculations,” he added. “The fluctuating workweek method has been utilized by a wide range of employers, and all types of industries could be impacted by the court’s final determination of method.”

Labor and Industry does, however, specify that employers should “follow the rule that provides the greater benefit to the employee where there are differences between the two laws.”

Adam Long, an attorney from McNees Law in Harrisburg explained that while this isn’t technically a law, it is a requirement.

“It’s more simply the reality of having federal and state laws that cover the same issues and are not identical in their requirements,” he said.

A ruling in GNC case, however, could set clearer guidelines on calculating overtime for a fluctuating workweek.

If it loses, GNC would have to pay $1.7 million in backpay to workers. And the decision could expose other employers to significant liability as well.

“If an employer fails to pay an employee properly, it could result in liquidated damages based upon the amount due and owed plus attorneys’ fees under state and federal law,” Ed Easterly, an attorney at Hoffman Hlavac & Easterly in Allentown. “Employers must also be mindful that the law is ever changing and that new regulations regarding paying employees properly come out frequently.

Denlinger expressed concern for independent businesses.

“Day-in and day-out, small business owners make good-faith efforts to comply with all compensation laws and with our state’s overtime laws, which are clearly confusing and vague,” he said. “A decision that results in significant payouts will lead to business closures and the loss of some number of jobs.”

In the meantime, the safest bet may just be not using the half-time calculation for a fluctuating workweek until a determination is made.

“Relatively few employers use the fluctuating workweek method in PA because of the uncertainty,” Long said. “If you use it you could be creating a liability.”