Philadelphia, Pa. (February 14, 2023) –
2022 was an unexpectedly busy year in the employment law arena for
Pennsylvania. Below, we recap the key new developments that
employers should be mindful of to ensure legal compliance in
2023.
Wage and Hour
On August 5, 2022, legislation signed by Governor Wolf took
effect, impacting three key wage and hour practices for employers
in Pennsylvania under the Pennsylvania Minimum Wage Act (PMWA):
overtime calculation, employee tips, and service charges.
New Overtime Calculation for Salaried Nonexempt
Employees
Pennsylvania law now diverges from federal law by changing the
formula for calculating an employee’s Regular Rate of Pay
(RROP).
Pennsylvania employers must now calculate the RROP for salaried,
nonexempt employees by adding all remuneration (subject to certain
preexisting exceptions) paid to the employee during a workweek
(e.g., weekly salary, nondiscretionary bonuses, and commissions)
and dividing this amount by 40 hours. To calculate the overtime
(OT) pay due, the regular rate is (a) multiplied by 1.5 and then
(b) multiplied by the number of hours worked in excess of 40 in
that workweek. Notably, the federal fluctuating workweek method
cannot lawfully be used for Pennsylvania salaried nonexempt
workers.
This new formula is, by design, more protective for employees
and results in greater overtime pay than under the federal formula.
Pennsylvania employers with salaried nonexempt employees should
evaluate their practices, especially for employees with a
fluctuating work week schedule, to ensure compliance.
Tipped Employees
Pennsylvania has aligned itself with federal law as to “tip
pools.” Managers and supervisors cannot receive tips from the
tip pools of non-managers and/or non-supervisors. Additionally, an
employer cannot take a tip credit from any employee that makes less
than $135 per month in tips. This is a significant increase from
the prior threshold of $30 per month. Pennsylvania has also adopted
the 80/20 rule to align with federal legislation. Under said rule,
tipped employees must not spend more than 20% of a workweek
performing tasks that do not generate tips.
However, distinguishing Pennsylvania from federal law, employers
are now prohibited from deducting credit card processing and other
fees from employee tips. Finally, the minimum cash wage for tipped
employees in Pennsylvania is $2.83 per hour, which is higher than
the federal $2.13 per hour minimum cash wage.
Service Charges
With respect to service charges – for example, mandatory
fees for a banquet or special function – Pennsylvania now
requires all service charges be distinguishable from tips.
Furthermore, employers retain discretion in choosing the manner in
which service charges are used. In the event service charges are
distributed to employees, they must be counted as wages and
included in the RROP. Service charges also cannot be used to
satisfy the difference between the hourly cash wage paid to the
tipped employee and the minimum wage.
The new rule also requires employers that levy service charges
to notify guests and patrons of the charge and the fact that it is
not a tip, directly on the menu or on their contract. The billing
statement or receipt must also contain a separate line for the
patron to add a voluntary tip in a further effort to distinguish
tips from service charges.
Discrimination, Harassment, Retaliation
Three notable rulings came out of the Court of Appeals for the
Third Circuit, of which Pennsylvania is a part.
In Groff v. DeJoy, the court held that the employer did
not violate Title VII by declining a religious accommodation for
exemption from Sunday work because it caused undue hardship. The
Third Circuit furthered a current circuit split by holding that a
religious accommodation is not reasonable under Title VII unless it
entirely eliminates the conflict between religious practice and
work requirements (35 F.4th 162.).
In Uronis v. Cabot Oil & Gas Corp, the Third
Circuit decided an important question under the Fair Labor
Standards Act (FLSA). The anti-retaliation provision of the FLSA
prohibits discrimination against employees who have engaged in
protected activity. Under Section 15(a)(3) of the FLSA, protected
activity includes having “testified” or being “about
to testify” in any FLSA-related proceeding. The court
concluded that requiring an employee to be literally scheduled to
testify or already subpoenaed to testify in order to be afforded
protection under Section 15(a)(3) would be inconsistent with the
statue’s broad protective purpose to. Rather, the court held
that an employee effectively “testifies” under Section
15(a)(3) when the employee files a consent to join an FLSA
collective action. Employers should be mindful of this ruling when
making hiring decisions involving applicants who have opted into an
FLSA collective or are known to be planning to do so, and when
evaluating potential adverse action against current employees in
the same position. (49 F.4th 263.)
In Canada v. Samuel Grossi & Sons, Inc., the Third
Circuit held that an employer’s motivation for investigating an
employee can be relevant to pretext in a Title VII discrimination
case. The employee plaintiff defeated summary judgment by showing
that the employer’s purported reasons for searching his cell
phone were weak, implausible, contradictory, incoherent, and more
likely motivated by retaliation. The employer could not provide any
legitimate basis for searching the employee’s locker, let alone
the cellphone inside the locker. (49 F.4th 340.)
Philadelphia-Specific
Phila. Code § 9-6000, et
seq.
Philadelphia now requires an employer of 50 or more employees to
provide a mass transit and bicycle commuter benefit program. The
bill took effect December 31, 2022 and requires one of the
following:
- Standard pre-tax mass transit expense or qualified bicycle
expense funded through payroll deductions. This must be consistent
with the Internal Revenue Code at benefit levels at least equal to
the maximum amount that may be deducted for such programs. - Employer-paid standard tax-free transit benefit. This option
requires an employer supply a Fare Instrument, such as pre-paid
vouchers or cards, for an employee’s mass transit expense.
Again, this must be offered at benefit levels at least equal to the
maximum amount that may be deducted for such program. - Any combination of the aforementioned two options. This means
employers can offer both pre-tax transit benefits, pre-tax bike
benefits, and an employer-paid tax-free transit benefit.
The ordinance defines qualified bicycle expenses as the
“purchase, maintenance, repair, and storage expenses related
to bicycle commuting.” Employers are required to provide
instructional and informational materials about the programs they
plan to offer to their employees for their review.
Phila. Code § 9-4116
Philadelphia has extended paid COVID-19 leave requirements
through December 31, 2023.
Phila. Code § 9-5500
Though it took effect on January 1, 2022, it is worth noting
that Philadelphia no longer permits pre-employment drug tests for
marijuana. Employers exempt from this include law enforcement,
positions in childcare, positions requiring a commercial
driver’s license, positions in healthcare, and positions in
which the employee could significantly impact the health or safety
of other employees or members of the public, as determined by the
enforcement agency.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.