Taking A Cut of Servers’ Tips Cost Chickie’s & Pete’s $6.8 Million

Taking A Cut of Servers' Tips Cost Chickie's & Pete's $6.8 Million

 If you were a customer at one of Chickie's & Pete's restaurants in the Philadelphia area or South Jersey in the past, you probably didn't know that part of the tip you left the server was going into the owner's pocket. But the Department of Labor (DOL) was watching and it cost the restaurants' owner, Peter Ciarrocchi, Jr., $6.8 million in back pay to workers. The company also must pay a $50,000 civil penalty.

The DOL's investigation involved 1,159 employees at the restaurant chain's locations in Egg Harbor Township and Bordentown, NJ; Northeast and South Philadelphia, Philadelphia International Airport, Bensalem, Warrington, Drexel Hill and Audubon, Pa.

According to an article by Jared Shelly in the Philadelphia Business Journal, the restaurant chain allegedly forced employees to contribute to a "tip pool" amounting to 2 to 4 percent of their daily table sales and Ciarrocchi then illegally retained about 60 percent of the tip pool. The DOL said the tip money was "required to be paid to the manager in cash at the end of each shift, even if the server received all tips on credit cards and therefore did not have cash on hand." That meant getting cash from an ATM or borrowing it from another server.

According to Laura Fortman, principal deputy administrator for the DOL's Wage and Hour Division, Chickie's & Pete's behavior is troubling not only because they unlawfully took tips from their workers, but failed to pay them even the $2.13 per hour the law requires when an employer takes a tip credit. Servers and bartenders were paid a flat rate of $15 per shift, which was not sufficient to cover the minimum hourly wage for tipped employees under federal law, and employees were not paid overtime wages when they worked more than 40 hours a week or for time spent at mandatory meetings and training. Employees also were improperly required to pay for uniforms.

It has also been reported that the company reached a $1.68 million settlement with approximately 90 current and former employees who filed federal lawsuits that included many of the same allegations.