Philadelphia POWER Act Affects Paid Sick Leave Obligations

On May 27, 2025, the mayor in Philadelphia, Pennsylvania signed into law File # 250065, which took effect immediately. Although the ordinance amended a variety of local employment standards, our focus is their impact on the Promoting Healthy Families and Workplaces Ordinance, the citywide paid sick leave law.

Coverage & CBA-Covered Employees: Since inception, and for more than a decade, the ordinance did not apply to employees covered by a bona fide collective bargaining agreement (CBA). As amended by the new law, however, the exception now applies only to non-probationary employees covered by a bona fide CBA. As a result, employers must provide paid sick leave for CBA-covered probationary employees, and allow them to use that leave in a manner that complies with the ordinance. Notably, the amendments do not address what happens to leave accumulated during their probation status when the employee completes that probationary period.

Tipped Employee Rate of Pay: Under the ordinance, paid sick leave must be paid at the same hourly rate and with the same benefits, including health care benefits, an employee normally earns. Historically, the calculation of the rate of pay for employees paid anything other than exclusively an hourly rate was addressed by the enforcement agency via opinion letters or regulations. This included tipped employees paid a sub-minimum wage, i.e., generally they had to receive the state minimum wage when they used leave, or, if they worked for a government contractor, a higher rate.

The amendments not only change who qualifies as a “tipped” employee – increasing the threshold from receiving $30 to $50 a month in tips – but also how they must be paid:

[T]he hourly rate of pay shall be the numerical average of (1) the hourly wage for Standard Occupational Classification (SOC) Code 35- 3011 “Bartenders,” (2) the hourly wage for SOC 35-3031 “Waiters & Waitresses,” and (3) the hourly wage for SOC 35-9011 “Dining Room & Cafeteria Attendants & Bartender Helpers,” all as published for Philadelphia County by the Pennsylvania Department of Labor and Industry.

Understandably, employers with tipped employees might be a bit confused, and we empathize with you. The amendments provide no information about where employers can find these rates. There is no explanation why an employer must “average” rates for three different positions to generate the rate of pay for an employee who might only hold one, or possibly none, of them. Employers that do not take a tip credit – i.e., they pay tipped employees an amount equal to or exceeding the state minimum – might not understand why they must compensate their employees at a rate different from the one they always earn. It is hoped the enforcement agency will publish guidance to make things clearer (or at least less confusing).

Retaliation: Many laws affected by the POWER Act already prohibit retaliation, including the paid sick leave ordinance. These retaliation provisions in the individual ordinances have been streamlined by the POWER Act under the newly created Protecting Victims of Retaliation Ordinance. For paid sick leave purposes, retaliation remains unlawful, and there still is a presumption of retaliation if adverse action is taken against employee within 90 days of exercising protected rights. One notable expansion of the anti-retaliation provisions, however, is that they apply not only to employers but also to “any person associated with the employer.”

Notice to Employees (Handbook): Before the POWER Act, the paid sick leave (and wage theft) ordinance required information in the mandatory notice to be included in a handbook, in addition to being either personally provided to an employee or conspicuously displayed via a poster. Employers may welcome the fact that this handbook requirement has been removed by the POWER Act.

Recordkeeping: The amendments increase the time that employers must keep required records – hours worked (including dates) and leave taken and paid – from two to three years.

Remedies: The amended ordinance includes a civil penalty of up to $2,000 per violation and removes the requirement that a notice or posting violation be “willful” to be subject to penalties. Additionally, certain employers could be required to display at their workplaces a written notice that they violated the law.

Damages have also expanded. For example, the previous cap of $2,000 for liquidated damages has been eliminated, replaced by the amount of damages suffered. Additionally, for retaliation violations, the amended ordinance expressly provides for compensation for physical or emotional harm the employee suffered.

Enforcement: Previously, before an employee could file a private lawsuit they had to file an administrative complaint with the enforcement agency. Post-POWER Act, exhausting administrative remedies is no longer a prerequisite to filing suit. However, employees must provide their employer written notice of an alleged violation and 15 days to remedy the harm unless the violation involves willful misconduct or retaliation.

The POWER Act extends the statute of limitations to three years, up from one year for administrative complaints and two years for private lawsuits. Moreover, the limitations period now will run from the date the employee knew or should have known about the alleged violation. However, the statute of limitations can be extended if an employer fails to provide the mandatory notice to employees.

Next Steps: Employers should monitor the Philadelphia Department of Labor webpage for new or revised FAQs and/or regulations, as well as an updated Notice to Employees. Because the amendments took effect immediately, impacted employers have no extended period of time to digest, prepare for, and then implement any necessary changes to their policies, practices, or payroll systems. Although many changes might not have an immediate effect on most employers, for employers with CBA-covered and/or tipped employees, there is a greater sense of urgency.