Pennsylvania HR Compliance Guide for Employers

Pennsylvania sits in the middle of the employer-regulation spectrum. It is significantly stricter than Texas or Florida, but considerably more manageable than California or New York. Most Pennsylvania employers can follow federal law as the baseline and add a handful of state-specific requirements. The exceptions come from two sources: the complexity of 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 simultaneously. If you have employees scattered across multiple 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, documentation, and compliance tracking without a dedicated HR department. For a direct comparison with neighboring states, see the New York HR compliance guide and the California HR compliance guide.

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). Pennsylvania also does not have a state OSHA plan for private or public sector workers. Federal OSHA has full direct jurisdiction over all private employers. Pennsylvania has no state WARN Act, 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 three recognized exceptions. 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. Statutory protections include over 30 federal and state laws that prohibit termination on specific grounds. Pennsylvania does not recognize the 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 requiring 60 days' notice before qualifying plant closings or mass layoffs. Pennsylvania's Department of Labor and Industry offers Rapid Response support for affected workers regardless of employer size.

Hiring and Onboarding Requirements

E-Verify in Pennsylvania

Pennsylvania does not require E-Verify for most private employers. Two mandatory exceptions exist. First, under Act 75 of 2019 (effective October 2020), all construction employers in Pennsylvania must use E-Verify for every employee. Second, employers working on public contracts exceeding $25,000 must use E-Verify under Act 127. For all other private employers, E-Verify is voluntary. For a complete overview of new hire reporting requirements across states, see the new hire reporting guide.

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 only consider felony and misdemeanor convictions that are directly related to the position. Arrest records without conviction, juvenile records, 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. Pennsylvania's Clean Slate Law, expanded by HB 689 in 2023, automatically seals certain criminal records after 7 years (reduced from 10 years).

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 the construction industry, Act 72 of 2010 requires a stricter 6-factor test including a $50,000 minimum liability insurance policy, a separate business address, and a written contract. For tax purposes, the IRS right-to-control test applies. In all cases, the presumption is that the worker is an employee. The burden of proving independent contractor status falls on the employer.

Pennsylvania's Medical Marijuana Act (Act 16 of 2016) prohibits discriminating against licensed medical marijuana patients in employment decisions, though employers may still prohibit on-site marijuana use and impaired work. For documentation and contracts when engaging true independent contractors, see the contractor onboarding guide.

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. The tipping threshold (the amount of monthly tips that qualifies an employee as tipped) is $135 per month, updated in August 2022. Pennsylvania enforces the federal 80/20 rule: tipped employees cannot spend more than 20 percent of their work time on non-tipped duties without losing tipped status. Employers cannot deduct credit card processing fees from employee tips. For current wage information, see dli.pa.gov.

Overtime: Where Pennsylvania Differs from the FLSA

Pennsylvania's Minimum Wage Act (PMWA) covers the same weekly overtime trigger as the FLSA (1.5x 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 and healthcare employers.

The absence of a computer employee exemption is the most commonly missed difference. Under FLSA, a computer professional earning $684 per week or $27.63 per hour may be exempt from overtime. Under Pennsylvania's PMWA, no such exemption exists. A software developer in Pennsylvania who works 50 hours in a week is owed 10 hours of overtime regardless of their hourly rate or salary level. The prohibition on fluctuating workweek is equally significant for employers who pay salaried non-exempt employees.

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. Before changing pay rates or fringe benefits, you must give advance written notice. Section 260.4 requires employers to notify employees at hire of their pay rate, the time and place of payment, and the amount of fringe benefits. Deductions from wages are severely restricted: 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. You cannot deduct for cash register shortages, breakage, or damaged equipment without specific written authorization for each incident. No deduction may reduce wages below minimum wage.

Leave and Time Off Requirements

Philadelphia Paid Sick Leave: POWER Act

Philadelphia's Promoting Workforce Equity and Resilience (POWER) Act, signed May 27, 2025, significantly expanded sick leave entitlements. Employers with 50 or more employees must provide up to 80 hours of paid sick leave per year. Employers with 10 to 49 employees must provide up to 56 paid hours. Employers with fewer than 10 employees must provide up to 40 unpaid protected hours. Leave accrues at 1 hour for every 40 hours worked and can be used after 90 days. Qualifying uses include the employee's own illness, care for a family member, school conferences, care for a service animal, and public health emergencies. Details at phila.gov/documents/paid-sick-leave-information.

Pittsburgh's Paid Sick Days Act (Chapter 626) was updated effective January 1, 2026. Employers with 15 or more employees must now provide up to 72 hours per year (previously 40 hours), accruing at 1 hour per 30 hours worked. Employers with fewer than 15 employees must provide up to 48 hours per year. For onboarding documentation that includes leave policy acknowledgments, see the new hire documents guide.

Anti-Discrimination Under the Pennsylvania Human Relations Act

The Pennsylvania Human Relations Act (PHRA, 43 Pa.C.S. §§ 951-963) is Pennsylvania's primary anti-discrimination law. It applies to employers with 4 or more employees, a significantly lower threshold than the 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 in November 2025 when Governor Shapiro signed the Pennsylvania CROWN Act (effective January 24, 2026): race now explicitly includes hair texture and protective hairstyles such as braids, locs, and twists. 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 (the PA Fairness Act has not passed). Complaints must be filed with the Pennsylvania Human Relations Commission within 180 days of the alleged violation. Pennsylvania is a deferral state, so the EEOC window extends to 300 days for parallel filing.

HIV/AIDS carries separate protection under PHRA: employers cannot require HIV testing as a condition of employment or promotion unless it is a bona fide occupational qualification. Pennsylvania also has an Equal Pay Law (43 Pa.C.S. §§ 336.1-336.10) that prohibits sex-based wage discrimination and applies to employers not covered by the federal FLSA, providing complementary coverage for smaller employers.

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. Pennsylvania's HB 560 (Pay Transparency Act) has been proposed but not enacted. For current employees in Philadelphia, their current pay is also protected under the ordinance.

Sexual harassment training is not required for private Pennsylvania employers. State government employees must receive training within 6 months of hire. For private employers, documented anti-harassment policies with clear reporting procedures are essential for PHRA defense even without a training mandate. For a complete onboarding approach that includes compliance training, see the compliance onboarding guide.

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. There is no waiting period. Pennsylvania uses a no-fault system: injured employees do not need to prove employer negligence to receive benefits. Details at pa.gov/agencies/dli/programs-services/workers-compensation.

Limited exceptions to the coverage mandate include casual workers, agricultural employees earning less than $1,200 per year or working fewer than 30 days, domestic servants (optional coverage), sole proprietors with no other employees, and executive officers who obtain an approved exclusion. Employers must post a notice with their insurer's information, report injuries to the insurer immediately, and file a First Report of Injury electronically within 7 days.

The Local Tax Maze: Pennsylvania's Biggest Payroll Challenge

Pennsylvania's local tax system is widely considered the most complex in the United States. There are over 2,500 taxing jurisdictions in the state. 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 is 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 into 69 Tax Collection Districts starting January 1, 2012. Employers must follow these steps for every employee. First, collect the Residency Certification Form (DCED-CLGS-32-6) from each employee. Second, identify the employee's Political Subdivision (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). 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 of each quarter's end and file an annual W-2 reconciliation by February 28. You must register with your district's tax collector within 15 days of becoming an employer. Major collectors 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, 2025 are 3.74 percent for residents and 3.43 percent for non-residents, making it one of the highest local wage taxes in the country. A reduced rate of 1.5 percent applies to low-income residents who qualify for a refund petition. A reduced rate of 1.5 percent applies to low-income residents who qualify. Philadelphia does not participate in reciprocal tax agreements with neighboring states or municipalities, which means employees who live in New Jersey or Delaware and work in Philadelphia owe the Wage Tax. Remote work adds complexity: employees who work from home by personal choice owe the Wage Tax on all hours; employees working remotely at the employer's direction do not owe the Wage Tax for time spent outside Philadelphia. All returns and payments must be filed through the Philadelphia Tax Center, which no longer accepts paper forms. For all required tax forms for new hires, see the tax forms for new employees guide.

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. Email and internet monitoring requires advance written notice establishing that employees have no expectation of privacy on company systems. You cannot secretly record conversations with employees, even one-on-one discussions. The standard employment law practice of recording HR meetings or calls without disclosing it is a felony in Pennsylvania.

Current employees have the right to inspect their own personnel file once per calendar year upon written request. Former employees do not have this right under Pennsylvania law, unlike California where former employees retain access rights.

Data Breach Notification

Pennsylvania's Breach of Personal Information Notification Act (73 Pa.C.S. §§ 2301-2329, updated by Act 33 of 2024 effective September 26, 2024) requires businesses to notify affected individuals of a data breach without unreasonable delay. State agencies must notify within 3 business days. For private employers, no specific deadline is stated, but "unreasonable delay" has been interpreted strictly. New requirements since September 2024 include notifying the Pennsylvania Attorney General when 500 or more Pennsylvania residents are affected, notifying consumer reporting agencies at 500 or more affected individuals (reduced from the previous 1,000 threshold), and providing 12 months of free credit monitoring when Social Security numbers, driver's license numbers, or financial account numbers are compromised.

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. At that point, the accrued amount becomes an enforceable wage obligation. For every separation, employers must provide Form UC-1609 (required since Act 9 of 2020) explaining the employee's unemployment compensation rights. Respond to UC claims within the timeframe specified, typically 21 days. Unemployment experience claims affect your SUTA tax rate in future years. For the complete offboarding process, see the offboarding best practices guide, the employee exit process guide, and the onboarding checklist for the hire-to-exit workflow overview.

Non-Compete Agreements

Pennsylvania enforces non-compete agreements under common law, with no specific statute governing them. A 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. 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. Since January 1, 2025, Act 74 of 2024 prohibits non-compete agreements for healthcare practitioners that exceed one year in duration, and any non-compete with a healthcare practitioner becomes void if the employer terminates the employment relationship without cause.

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 (Act 2 of 2009) covers employers with 2 to 19 employees who offer fully insured group health plans. It provides up to 9 months of continuation coverage. The employee pays up to 105 percent of the group premium rate. Unlike federal COBRA, the obligation to notify the insurer of a qualifying event rests with the qualified beneficiary (the departing employee), not the employer. The employer must notify the employee of mini-COBRA rights within 30 days of the qualifying event.

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. For a starting template, see the sample employee handbook.

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.

Key Legislative Changes 2020-2026

The most operationally significant recent changes for small Pennsylvania employers are the PHRC 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. For a comparison with how the Florida HR compliance guide approaches similar topics, including workers' comp and at-will exceptions, the contrast illustrates how much varies by state.

Pennsylvania vs. Federal Law vs. California

Frequently Asked Questions