Legal Alerts

2022 Pennsylvania Labor & Employment Year End Review

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:

1. 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.
2. 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.
3. 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.

For more information on these developments, contact the author or editors of this alert. Visit our Labor & Employment Practice page for additional alerts in this area.

Author:

Alexandra B. Adams, Associate

Editor:

Sunshine R. Fellows, Partner

Thalia S. Rofos, Partner

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