Here's One Ripoff of Workers That Didn't Go Unpunished

If you think wage theft is being overblown by worker advocates, as some business groups suggest, check out this outrageous story. 

Last week, Philadelphia restaurant franchise Chickie's & Pete's agreed to pay employees around $8.6 million in back wages to settle a Department of Labor (DOL) investigation and several lawsuits brought by employees past and present.

Management required servers to pay between 2% and 4% of their daily sales in cash back to the restaurant at each shift’s end. Management expected servers who did not have that cash on hand to either borrow money from co-workers, or withdraw it from an ATM. Restaurant owner Peter Ciarocchi then personally “retained approximately 60% of the tip pool,” according to the DOL.

This is spectacularly illegal.

Federal law does, to a limited extent, permit mandatory tip pooling, but only under specific circumstances. Employers may obligate tipped employees to contribute as much as 15% of their tips to a pool, which then divides exclusively between other tipped employees. Under no circumstances does the law entitle managers, owners or any non-tipped employees to any percentage of this pool.

Chickie’s and Pete’s also failed to pay tipped employees the dirt-per-hour wages required by the Fair Labor Standards Act. Only days before announcing the settlement did the restaurant post signs “saying it would stop paying $15 a shift and start paying $2.83 an hour in Pennsylvania and $2.13 in New Jersey,” according to Jane M. Von Bergen at The Philadelphia Inquirer.

The investigation found other violations: the restaurant did not properly compensate for overtime work, mandatory meetings and trainings, and work uniform purchases. The restaurant agreed to other reparations such as three years of FLSA compliance monitoring and employee training on the Act. Ciarrocchi has also agreed to personally write an article in a trade journal about employers’ obligations under FLSA.

Fabricio Rodriguez, veteran labor activist and coordinator at Restaurant Opportunities Center (ROC) United, helped get the Gratuity Protection Bill through Philadelphia City Council in 2011. The bill specifically disallows employers from skimming employee compensation to cover credit card processing fees. ROC United “heard back from Chickie's and Pete's employees after that,” said Rodriguez. The skimming had persisted.

Optimistic overall, he referred to this latest settlement as "a reflection of the changing environment" in restaurant worker advocacy, and only the latest in a string of several similar victories. New York restauranteur Mario Battali paid out $5.25 million in back wages under similar circumstances in 2012. In the wake of a strike, Philadelphia restaurant Fat Salmon Sushi agreed to pay $40,000 in back wages for employees this past December.

Many in this sector risk job security and sometimes more when they speak out about law-breaking employers; they deserve proof that they’re doing so for good reason. Big settlements like the one reached this week are important because they provide at least some of that proof.

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