Pennsylvania HR Compliance Guide for Employers

Pennsylvania sits in the middle of the employer-regulation spectrum: significantly stricter than Texas or Florida, but considerably more manageable than California or New York. This guide walks you through the Pennsylvania employment laws that apply to a small business, from hiring paperwork and overtime to leave, local taxes, Philadelphia's ordinances, and termination.

Most Pennsylvania employers can follow federal law as the baseline and add a handful of state-specific requirements. The exceptions come from two sources: Pennsylvania's local tax system, which is among the most complicated in the country, and Philadelphia, which has built its own comprehensive employment law framework that rivals some state governments in scope.

If you have employees in Philadelphia, you are effectively managing two sets of employment rules at once. If your employees live in several different Pennsylvania municipalities, you are managing a local tax withholding puzzle that surprises even experienced payroll professionals. FirstHR was built for exactly this kind of complexity: onboarding, document management, and task workflows with deadlines for small businesses.

What Makes Pennsylvania HR Compliance Unique

Three features distinguish Pennsylvania employment law from most other states. First, the PHRA's 4-employee threshold means that very small businesses face anti-discrimination liability earlier than they would under federal law. Second, the local Earned Income Tax system requires employers to identify and withhold taxes at the municipal level for every employee based on where they live, not where they work. Third, Pennsylvania is one of a small number of states where employees themselves contribute to unemployment compensation funding.

Pennsylvania is not a right-to-work state. Under the Pennsylvania Labor Relations Act (Act 294 of 1937), unions may require employees to pay dues or fees as a condition of employment in private sector workplaces. In public sector employment, mandatory fees are prohibited following the Supreme Court's ruling in Janus v. AFSCME (2018).

Just as important is what Pennsylvania does not have. There is no state OSHA plan for private or public sector workers, so federal OSHA has full direct jurisdiction over all private employers. Pennsylvania also has no state WARN Act for mass layoffs, no mandatory paid sick leave (statewide), and no pay transparency requirements. On these topics, federal law and employer discretion govern.

At-Will Employment and Its Exceptions

Pennsylvania has been an at-will employment state since 1891. Either party can end the employment relationship at any time, for any or no reason, subject to two recognized common-law exceptions plus the statutes. Pennsylvania is among the 49 states that presume at-will employment, Montana being the only exception (Cornell LII).

The public policy exception prohibits firing employees for refusing to commit an illegal act, filing a workers' compensation claim (established in Shick v. Shirey, 1998), or responding to jury duty under 42 Pa.C.S. § 4563. The implied contract exception applies when handbook language or verbal statements create a reasonable expectation of continued employment.

The third layer is statutory. Federal and state anti-discrimination, leave, and retaliation laws each carve out their own protected ground, and a termination that trips any one of them is unlawful whatever the handbook says. Beyond those three layers, Pennsylvania courts have declined to recognize a covenant of good faith and fair dealing as an employment doctrine.

Pennsylvania has no state WARN Act. Federal WARN (29 U.S.C. §§ 2101-2109) applies to employers with 100 or more employees and requires 60 days' notice before a qualifying plant closing or mass layoff. Pennsylvania's Department of Labor and Industry offers Rapid Response support for affected workers regardless of employer size.

Hiring and Onboarding Requirements

Hiring in Pennsylvania starts with the same federal forms every employer uses, plus a short list of state items. The most Pennsylvania-specific of them is the residency form that drives local tax withholding. Here is each document and when it is due.

E-Verify in Pennsylvania

Pennsylvania does not require E-Verify for most private employers. Two mandatory exceptions exist. First, under the Construction Industry Employee Verification Act (Act 75 of 2019, effective October 7, 2020), every construction employer in Pennsylvania must run E-Verify on each new employee.

Public works are the second exception. Contractors and subcontractors must use E-Verify on projects estimated above $25,000, under the Public Works Employment Verification Act (Act 141 of 2022, which replaced Act 127 of 2012 on July 22, 2023). For every other private employer, E-Verify is voluntary.

Background Checks and the CHRIA

Pennsylvania's Criminal History Record Information Act (CHRIA, 18 Pa.C.S. § 9125) restricts how employers use criminal records. Employers may consider felony and misdemeanor convictions only to the extent they relate to the applicant's suitability for the position. Arrest records without conviction and summary offenses cannot be used in hiring decisions. If you deny employment based on criminal history, you must provide written notice to the applicant.

Record sealing is the other state rule to know. Pennsylvania's Clean Slate law was expanded by Act 36 of 2023, signed December 14, 2023, whose new waiting periods took effect 180 days later, on June 11, 2024: eligible misdemeanor convictions now seal automatically after 7 conviction-free years rather than 10, and eligible drug convictions under the Controlled Substance, Drug, Device and Cosmetic Act, felonies included, seal after 10.

One more state law limits hiring decisions. Pennsylvania's Medical Marijuana Act, signed April 17, 2016, bars an employer from refusing to hire, firing or otherwise discriminating against an employee solely because the employee is certified to use medical marijuana (35 P.S. § 10231.2103(b)). You need not accommodate use on your premises, and you may still discipline an employee who works under the influence when their conduct falls below the standard of care for the position.

Worker Classification

Pennsylvania uses different tests depending on context. For unemployment compensation purposes, a two-part test applies: the worker must be free from the employer's control and direction, and must be engaged in an independently established business. For tax purposes, the IRS right-to-control test applies.

For the construction industry, the Construction Workplace Misclassification Act (Act 72 of 2010, effective February 10, 2011) sets a stricter three-part test: a written contract, freedom from control, and an independently established trade. That third Act 72 part is where construction employers get caught, because it carries six conditions of its own.

Those six conditions include essential tools owned independently of the hiring party, an independent business location, exposure to profit or loss, and at least $50,000 in individual liability insurance carried through the contract term. Under both state tests the starting presumption is that the worker is an employee, and the burden of proving independent contractor status falls on the employer.

Hiring Minors Under the Child Labor Act

Pennsylvania child labor laws, set by the Child Labor Act, require a work permit for every employee under 18, and the minor's school district issues it. Children under 14 cannot work in most occupations at all, with narrow carve-outs for family farms, domestic service, caddies from age 12, newspaper carriers from age 11, and entertainment performers.

Two limits apply at every age. No minor may work more than six consecutive days, with newspaper delivery the only exception, and every child worker gets a 30-minute meal period on or before five consecutive hours of work. Employers who hire minors also post the LLC-5 abstract and the LLC-17 hours notice, both listed in the postings section below.

Wages, Hours, and Overtime: Pennsylvania's Hidden Differences

Minimum Wage and Tipped Employees

Pennsylvania's minimum wage is governed by the Pennsylvania Minimum Wage Act (43 P.S. § 333.101 et seq., Act 5 of 1968). The current rate is $7.25 per hour, unchanged since July 24, 2009, and equal to the federal floor.

For tipped employees, the cash wage is $2.83 per hour, with a tip credit of $4.42. A worker counts as tipped once monthly tips exceed $135, a threshold the state raised from the old $30 figure in its regulations effective August 5, 2022.

Those same 2022 regulations gave Pennsylvania its own 80/20 rule, which stands on its own footing whatever happens to the federal dual-jobs regulation. An employee for whom the employer takes a tip credit cannot spend more than 20 percent of weekly working hours on duties that do not directly generate tips, and credit card or other payment processing fees may never be deducted from tips (PA Department of Labor and Industry).

The rate itself has not moved in 17 years, and not for want of bills. The Pennsylvania House passed a $15 minimum wage measure in March 2026, the third time it has sent one across, and the Senate has not acted (Office of the Governor). The Pennsylvania minimum wage page sets out the exceptions that still apply, the tipped and youth rates, and the poster requirement.

Overtime: Where Pennsylvania Differs from the FLSA

Pennsylvania's Minimum Wage Act (PMWA) uses the same weekly overtime trigger as the federal Fair Labor Standards Act, or FLSA: 1.5x pay for hours over 40 per week. But the PMWA diverges from federal law in four important ways that create real compliance traps, especially for tech employers and anyone paying salaried non-exempt staff.

The absence of a computer employee exemption is the most commonly missed difference. Under the FLSA, a computer professional earning $684 per week or $27.63 per hour may be exempt from overtime.

Chapter 231 of the Pennsylvania Code has no computer employee section and no highly compensated employee section at all, so a software developer in Pennsylvania who works 50 hours in a week is owed 10 hours of overtime whatever the salary (34 Pa. Code Ch. 231).

The fluctuating workweek ban matters just as much if you pay salaried non-exempt staff. Section 231.43 of the same chapter fixes the regular rate for a salaried non-exempt employee at total remuneration divided by 40 hours. The federal half-time method depends on dividing by the hours actually worked instead, and Pennsylvania simply does not allow the denominator to float.

Wage Payment and Collection Law (WPCL)

The WPCL (43 P.S. §§ 260.1-260.12) governs wage payment in Pennsylvania and is stricter than most employers expect. Section 260.4 requires employers to notify employees at hire of their pay rate, the time and place of payment, and the amount of any fringe benefits or wage supplements. Any change to those items must be notified before it takes effect, and keeping the facts posted conspicuously at your place of business satisfies the duty.

Deductions from wages are severely restricted under the WPCL: you may only deduct for legally required withholdings, benefit plan contributions with written authorization, union dues, charitable donations, repayment of employer loans, and purchases from the employer with written consent. No deduction may reduce wages below minimum wage.

Cash register shortages, breakage, and damaged equipment do not appear on the Department of Labor and Industry's list of authorized deductions in 34 Pa. Code 9.1, and most items that do appear need the employee's written authorization. Treat a loss deduction as off limits unless the regulation covers it.

Meal and Rest Breaks

Pennsylvania labor law does not require breaks for adult employees. The Department of Labor and Industry says it plainly in its wage FAQs: no break is owed to anyone 18 or over. Minors ages 14 through 17 are the exception: the department requires a break period of at least 30 minutes for a minor who works five or more consecutive hours.

No Pennsylvania law requires a 15-minute break for adult employees. If you give one anyway, federal rules decide the pay treatment. A rest period shorter than 20 minutes counts as hours worked and must be paid under 29 CFR 785.18, while a bona fide meal period of 30 minutes or more, with the employee fully relieved of duty, is unpaid.

Leave and Time Off Requirements

Pennsylvania adds little to federal leave law. The state has no paid sick leave, voting leave, or bereavement leave mandate, so your obligations come mainly from federal law, job protection for military service and jury duty, and the local sick leave rules in Philadelphia and Pittsburgh.

Philadelphia Paid Sick Leave: POWER Act

Philadelphia's sick leave ordinance (Chapter 9-4100) gives employees 1 hour of paid sick leave for every 40 hours worked, up to 40 hours a year. Employers with 10 or more employees must pay for that time, while employers with 9 or fewer provide it unpaid. Employees can use accrued leave starting on the 90th calendar day after they begin employment (Phila. Code § 9-4104).

The Protect Our Workers, Enforce Rights (POWER) Act, signed on May 27, 2025 and effective immediately, left those accrual amounts alone and changed enforcement instead. Under the POWER Act, employers keep three years of records on hours worked and sick leave taken, and retaliation is presumed when an adverse action follows protected activity within 90 days.

The POWER Act also requires an employee to give a 15-day notice and chance to cure before suing, and it removed the $10,000 cap on city wage theft complaints. The city publishes the ordinance and an employer memo at phila.gov/documents/power-act.

Pittsburgh, the other Pennsylvania city with its own sick leave law, amended its Paid Sick Days Act (Chapter 626) effective January 1, 2026. Employers with 15 or more employees must now provide up to 72 hours of paid sick time per year against the previous 40, and employers with fewer than 15 must provide up to 48 hours of paid sick time (Pittsburgh Code § 626.03, as amended by Ordinance 11 of 2025). Accrual moved to 1 hour for every 30 hours worked at every employer size. One clause of the city's December 2025 administrative guidelines calls the small-employer hours "Unpaid Sick Time", but the ordinance itself, and the guidelines' own accrual clause, call them paid.

Anti-Discrimination Under the Pennsylvania Human Relations Act

The Pennsylvania Human Relations Act (PHRA, 43 P.S. §§ 951-963) is Pennsylvania's primary anti-discrimination law. It applies to employers with 4 or more employees, a significantly lower threshold than federal Title VII's 15. Any Pennsylvania employer with 4 or more people on payroll must comply with PHRA in hiring, compensation, and all terms and conditions of employment.

Protected Classes Under the PHRA

PHRA protects race, color, religious creed, ancestry, national origin, age (40+), sex, disability, and use of guide or support animals. The definition of race was expanded on November 25, 2025 when Governor Shapiro signed the Pennsylvania CROWN Act, effective January 24, 2026.

The PHRC states that race discrimination protections now include "traits associated with race, including hair texture and protective hairstyles" such as locs, braids, and twists (PHRC). Pennsylvania became the 28th state with a law of this kind.

The CROWN amendment leaves room for workplace rules. An employer may still enforce a health and safety rule, or another rule justified as a bona fide occupational qualification, that affects hairstyles, but only if it shows the rule protects health or safety, is nondiscriminatory in purpose, is tailored to the position, and is applied equally.

The definition of sex was expanded through PHRC regulations effective August 16, 2023 to include gender identity and expression, sexual orientation, pregnancy, childbirth, and breastfeeding. These are regulatory protections actively enforced by the PHRC, not legislative ones, since the PA Fairness Act has not passed.

PHRA complaints go to the Pennsylvania Human Relations Commission within 180 days of the alleged violation. Because Pennsylvania is a deferral state, meaning it has its own agency that handles discrimination charges, the parallel window for filing with the federal Equal Employment Opportunity Commission (EEOC) runs to 300 days.

Pennsylvania also has an Equal Pay Law (43 P.S. §§ 336.1-336.10) that prohibits sex-based wage discrimination. Its definition of employee leaves out anyone subject to section 6 of the federal FLSA, the minimum wage section that carries the federal Equal Pay Act, so the state law covers the workers federal equal pay rules do not reach.

Salary History and Pay Transparency

Philadelphia's Wage Equity Ordinance (Chapter 9-1131, enforcement began September 1, 2020) prohibits all employers from asking about a candidate's salary history, requiring salary history disclosure, or using prior salary to set compensation. You may ask about salary expectations and may use market data. There is no statewide salary history ban and no statewide pay transparency requirement, so Pennsylvania law does not require a pay range in a job posting.

The same goes for harassment training: sexual harassment training is not required for private Pennsylvania employers, but documented anti-harassment policies with clear reporting procedures are still essential for PHRA defense.

Workers' Compensation: Mandatory from Day One

Pennsylvania's Workers' Compensation Act (77 P.S. §§ 1-1041.4) requires virtually all private employers with one or more employees to maintain workers compensation coverage. Coverage begins on the employee's first day, with no waiting period. Pennsylvania uses a no-fault system: injured employees do not need to prove employer negligence to receive benefits. The Department of Labor and Industry explains the program at pa.gov/agencies/dli/programs-services/workers-compensation.

The Pennsylvania workers compensation page has the detail: the headcount at which coverage becomes mandatory, who is excluded, where to buy the policy, the injury reporting deadlines, and what going without coverage costs.

Limited exceptions to the coverage mandate include casual workers, agricultural laborers where no one worker is paid $1,200 or more in a calendar year or works 30 or more days, domestic servants who have not elected coverage, sole proprietors with no other employees, licensed real estate and insurance salespeople paid on commission, and executive officers who obtain an approved exclusion. Employers must post a notice carrying the insurer's name, address, and telephone number where employees can see it.

Injury reporting runs on two clocks. A First Report of Injury for a death must reach the bureau within 48 hours, and for any other injury causing lost time the employer files electronically within seven days of the injury (PA Department of Labor and Industry).

The Local Tax Maze: Pennsylvania's Biggest Payroll Challenge

Pennsylvania's local tax system is widely considered the most complex in the United States. Every employer must withhold local Earned Income Tax for each employee based on where that employee lives, not where they work. This applies even if your business sits in one municipality and your employees commute from 10 different neighboring towns.

Earned Income Tax Under Act 32

Act 32 of 2008 (Local Tax Enabling Act) consolidated local tax collection, starting January 1, 2012, into 69 Tax Collection Districts. The Department of Community and Economic Development (DCED) publishes the district lists, the Political Subdivision (PSD) codes, and the rate lookups employers work from (PA DCED).

Employers must follow five steps for every employee. First, collect the Residency Certification Form (DCED-CLGS-32-6) from each employee. Second, identify the employee's PSD codes for their home municipality and school district using the DCED's online lookup tool. Third, calculate the correct EIT rate (typically around 1 percent, split between municipality and school district).

The last two steps move the money. Fourth, withhold the greater of the total resident rate for the employee's home municipality or the non-resident rate for your work location. Fifth, remit quarterly within 30 days after the end of each calendar quarter, then file the W2-R annual reconciliation on or before the last day of February following the close of the year (PA DCED).

Registration comes before any of that. You need a local tax ID from the appropriate collector before you start withholding, and which collector you deal with depends on the district your worksite sits in. The larger ones include Keystone Collections Group, Berkheimer Tax Innovations, Jordan Tax Service, and Capital Tax Collection Bureau.

Philadelphia Wage Tax

Philadelphia operates entirely outside the Act 32 system under its own Sterling Act. The Wage Tax rates effective July 1, 2026 are 3.735 percent for residents and 3.425 percent for non-residents, down from the 3.74 and 3.43 percent rates in effect from July 1, 2025 (City of Philadelphia). A taxpayer, resident or not, who qualifies for Pennsylvania tax forgiveness pays a reduced 1.5 percent rate by claiming an income-based Wage Tax refund.

Reciprocity is the other Philadelphia surprise. The city does not participate in reciprocal agreements with neighboring states or municipalities, so employees who live in New Jersey or Delaware and work in Philadelphia owe the Wage Tax anyway.

Remote work adds a further wrinkle to the Wage Tax: an employee working from home by personal choice owes the tax on all hours, while one working remotely at the employer's direction does not owe it for time spent outside the city. All returns and payments go through the Philadelphia Tax Center, which no longer accepts paper forms.

Philadelphia: A City with Its Own Employment Law Ecosystem

Philadelphia has built one of the most comprehensive local employment law frameworks of any American city. Employers with workers in Philadelphia must comply with Pennsylvania state law and Philadelphia's ordinances simultaneously. The city's rules frequently exceed state standards in scope and coverage thresholds.

Employee Privacy, Recording, and Data Breach

All-Party Consent: Pennsylvania's Wiretapping Law

Pennsylvania is an all-party consent state under the Wiretapping and Electronic Surveillance Control Act (18 Pa.C.S. §§ 5701-5782). Recording any wire, electronic, or oral communication without the consent of all parties is a third-degree felony. This applies without exception in the workplace. You may conduct video-only surveillance in non-private work areas, but adding audio to any recording requires all-party consent.

That rule reaches everyday HR work. You cannot secretly record conversations with employees, even one-on-one discussions, and recording an HR meeting or call without disclosing it, a common practice elsewhere, is a felony in Pennsylvania. For email and internet monitoring, a written policy stating that employees have no expectation of privacy on company systems is the practical safeguard.

Employees also have a limited right to see what you keep on them. Current employees have the right to inspect their own personnel file once each calendar year, absent reasonable cause to do so more often, and the employer may require the review to happen in front of a designated official.

Former employees have no such right in Pennsylvania. In Thomas Jefferson University Hospitals, Inc. v. Department of Labor and Industry (decided June 20, 2017), the Pennsylvania Supreme Court held that a terminated employee cannot inspect her file, because the Inspection of Employment Records Law defines an employee as a person currently employed, laid off with reemployment rights, or on leave of absence.

Data Breach Notification

Pennsylvania's Breach of Personal Information Notification Act (73 P.S. §§ 2301-2329, amended by Act 33 of 2024 effective September 26, 2024) requires businesses to notify affected individuals of a data breach without unreasonable delay. Commonwealth agencies must notify within 7 business days of determining a breach. For private employers the statute sets no fixed number of days: under 73 P.S. § 2303, notice goes out without unreasonable delay, allowing only for a delay requested by law enforcement and for the time needed to determine the scope of the breach and restore the reasonable integrity of the data system.

Act 33 added duties on top of that. When a breach requires notice to more than 500 Pennsylvania residents, an entity must notify the Pennsylvania Attorney General at the same time it notifies individuals. When it sends notices to more than 500 people at one time, it must also notify the nationwide consumer reporting agencies.

The amended law also requires the entity to make a free credit report and 12 months of credit monitoring available whenever a Social Security number, a bank account number, or a driver's license or state ID number was involved. Check the Attorney General's current guidance before you send anything, because the notice content is prescribed.

Termination and Separation Compliance

Final Paycheck and UC Obligations

Under the WPCL, final wages are due no later than the next regular payday following any separation, whether voluntary or involuntary. Pennsylvania does not require employers to pay out accrued vacation or PTO at termination unless the employer's written policy explicitly promises it. If the policy does promise it, the accrued amount becomes an enforceable wage obligation.

For every separation, Section 206.1 of the UC Law requires notice of the availability of unemployment compensation, and the department's Form UC-1609 is the recommended way to give it. Answer each claim notice promptly, and file any request for relief from charges (asking that the benefits not be charged to your account) within 21 days. Unemployment claims charged to your account affect your SUTA tax rate in future years.

Non-Compete Agreements

Pennsylvania enforces non-compete agreements under common law, with no specific statute governing them. An enforceable non-compete must protect a legitimate business interest (trade secrets, confidential customer relationships, specialized training), be reasonable in scope, duration, and geographic coverage, and be supported by adequate consideration.

Timing matters for consideration. If an employee signs a non-compete after starting work, continued employment alone is not sufficient consideration. A promotion, raise, or meaningful bonus at the time of signing is required. Pennsylvania courts may blue-pencil (narrow) overly broad restrictions rather than voiding them entirely.

Healthcare employers face a stricter rule. Under Act 74 of 2024, a non-compete signed with a health care practitioner (a physician, physician assistant, or certified registered nurse practitioner or nurse anesthetist) after the act took effect on January 1, 2025 is void and unenforceable unless it runs no more than one year, and even a one-year covenant cannot be enforced if the employer dismissed the practitioner.

COBRA and Pennsylvania Mini-COBRA

Federal COBRA applies to employers with 20 or more employees, providing up to 18 months of health insurance continuation. Pennsylvania's Mini-COBRA law covers employers with 2 to 19 employees who offer fully insured group health plans. It provides up to 9 months of continuation coverage, and the employee pays the full premium plus an administrative fee of up to 5 percent (Pennsylvania Insurance Department).

Mini-COBRA's notice duty is the piece employers miss: after a qualifying event, the employee has to be told about the continuation right, and then has 30 days to elect coverage.

Employee Handbook: Not Required, But Essential

Pennsylvania does not legally require employers to maintain an employee handbook. But the Pennsylvania Human Relations Commission, workers' comp investigators, and unemployment compensation boards routinely request policy documentation when handling complaints and claims. A handbook is your primary evidence that policies were communicated and acknowledged.

Required Workplace Postings

Pennsylvania state posters are available free from the PA Department of Labor and Industry at pa.gov/agencies/dli/resources/for-employers-and-educators/mandatory-postings. Federal posters are available at dol.gov. For remote employees, distribute all required postings electronically with acknowledgment of receipt.

Recent Legislative Changes

The most operationally significant recent changes for small Pennsylvania employers are the PHRC's expanded sex protections (2023), the POWER Act for Philadelphia employers (2025), the CROWN Act (effective January 2026), and the healthcare non-compete ban (January 2025). Employers in Pittsburgh should note the expanded sick leave effective January 2026.

Pennsylvania vs. Federal Law vs. California

Pennsylvania sits between the federal baseline and California. It matches federal law on minimum wage and the overtime salary threshold, reaches smaller employers than federal law on discrimination, and shares California's all-party consent rule for recording.

If you are adding your first Pennsylvania employee, start with the obligations that apply from the first hire: workers' comp coverage, the new hire report, the residency form for local tax, and the state posters. Then plan for the PHRA threshold as you grow, and treat Philadelphia as its own jurisdiction the day anyone works inside city limits.

Frequently Asked Questions