Chickie & Pete’s Crab House and Sports Bar has agreed to pay $8 million in back wages plus damages to its servers in several locations across South Jersey. According to CBS Philly on Feb. 20, the U.S. Department of Labor has called this “its largest tip-credit case ever.”
The problem stems from a tip-sharing practice, specific to Chickie & Pete’s. Tip sharing is an industry standard in these types of jobs. Many servers share tips with bus boys and bartenders. The so-called “Pete Tax,” however, involved servers being forced to share tips in a mandatory pool of which management kept 60 percent.
According to Brian Johnson, Regional Director of Enforcement for the Wage and Hour Division of the U.S. Labor Department, “Tips are the property of the employees who receive them. Management is not allowed to participate in the tip pool.” He told KYW News Radio, “They kept detailed records on the tip-out amounts and disciplinary action was threatened if they did not tip out at the end of the night.”
Johnson said that the money had to be paid in cash at the end of the night even if the entire amount of a server’s tips had been put on credit card. “They were required to go into their wallet to pay the tip-out amount, or go to an ATM, or borrow from a co-worker.”
The chain was also cited for failing to pay the minimum wage of $2.13 for a tipped position. Employees were paid $15 per shift which didn’t suffice when the shift went long. Chickie & Pete’s didn’t pay overtime and didn’t pay anything for mandatory meetings and training. Workers also had to pay for their own uniforms.
The chain’s owner, Pete Ciarrocchi Jr., issued a statement about how the company is settling all issues resulting from this policy.
Our employees are the backbone of our company,” Ciarrocchi said, “and they deserve our respect and appreciation. We believe these settlements are in their best interests, and we worked cooperatively with the DOL and with plaintiffs’ counsel to make them happen.”
The $6.8 million in fines will be divided among 1,159 employees. The balance of $1.68 million is to settle federal lawsuits from employees. The settlement includes a $50,000 civil penalty and compliance measures like internal and external monitoring, plus more complete training with specific training in employee rights. Additionally, Mr. Ciarrochi will write an article for an industry journal which delineates an employer’s obligations under the federal Fair Labor Standards Act.
While it’s good that Chickie & Pete’s is settling this now and making amends, one wonders how they didn’t know this practice was illegal in the first place. The rules supposedly haven’t changed. Management was never entitled to the tips of its servers. What do you think? Was it intentional money-grubbing or just something that started one night and snowballed? Leave a comment and tell me what you think.