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Fried: Philly Sports Bar Chain to Pay Largest Wage and Tip Settlement in U.S. History

Chickie and Petes Fried

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A popular chain of Philadelphia sports bars will pay a total of $8.5 million to settle the largest wage and tip violation case in the history of the labor department.  Chickie’s and Pete’s, which has a dozen locations in the Delaware Valley, will pay $6.8 million in back pay and damages to 1,100 current and former employees. The investigation began in November 2012.  

In a separate move, the company announced it would pay $1.7 million to settle with another 90 workers who had alleged unfair labor practices in private lawsuits.

Laura Fortman, principal deputy administrator for the department’s Wage and Hour Division, said in a statement: “When employers exploit tipped workers, they not only harm their employees who are working hard to earn a living, but also take advantage of the trust of their customers.”

Speaking on behalf of Chickie’s and Pete’s, Kevin Feeley said that the company “had problems, like many other restaurant chains, following the federal government’s complicated rules on tip wages.” He told the New York Times:

“We’ve said from Day 1 that we would cooperate with the Department of Labor in the investigation. We understand there might need to be some changes in the tip pool and tip credit practices.”

“I think you can see today a good-faith effort to do the right thing by our employees,” he added. “That’s been the company’s intent.”

The employees caught a break when records of what the establishment called the “Pete’s Tax” were uncovered.  Employees were forced to pay into a tip pool, of which 40 percent went to bartenders and the other 60 percent went to management, according to CBS Philly:

Brian Johnson, the Labor Department’s regional director of enforcement for the wage and hour division, says a yearlong investigation at nine locations found that the chain required its wait staff to contribute to a tip pool, then kept 60 percent of it.

“Tips are the property of the employees who receive them,” Johnson said today. “Management is not allowed to participate in the tip pool.”

Nonetheless, Johnson says, the tip pool was part of the chain’s business model.

“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,” he tells KYW Newsradio.

Johnson says the money — which servers referred to as “Pete’s tax” — had to be paid in cash at the end of the night even if the server’s tips had all been charged to credit cards.

“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,” according to Johnson.

In addition to the “Pete’s Tax,” the labor department found that the company failed to pay overtime, required employees to pay for their uniforms, and did not compensate employees for mandatory meetings and training.

The Labor Department’s Brian Johnson called the case “exceptional,” noting that over the past year the agency had documented about $26 million in wage violations at over 3,900 restaurants.  


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