According to information from the DOL's Wage and Hour Division (WHD), the employer – Chickie's & Pete's – improperly took tips in a practice that was called ”Pete's tax“ and ran afoul of minimum wage, overtime and record-keeping rules. The company and its owner – Peter Ciarrocchi, Jr. – agreed to pay the penalties for the nine locations as well as a $50,000 civil money penalty. The U.S. District Court still must review and approve the consent judgment.
“The egregious actions by Chickie's & Pete's harmed real people and violated the promise that a fair day's work deserves a fair day's pay,” said DOL Secretary Thomas E. Perez. “Restaurant servers are among the lowest paid workers in this country, with many earning incomes below the poverty line. Tipped workers deserve better and this action shows that the Department of Labor is ready to stand up for them.”
Tips, of course, belong to the employee who receives them, but employers can claim a credit based on the tips towards the full minimum wage, currently at $7.25 per hour. An employer can pay tipped employees as little as $2.13 an hour in direct wages as long as the tips make up the difference. The WHD investigation discovered that that the employer required servers to contribute a portion of their tips to an improper tip pool, equal to 2-4 percent of the server's daily table sales. The owner then retained about 60 percent of that money as "Pete's Tax." This money had to be paid in cash at the end of each shift, and sometimes servers had to withdraw cash from a nearby ATM or borrow from another server if their tips were mostly in credit card receipts.
Servers and bartenders were paid a flat rate of $15 per shift at most locations. Mandatory meetings and training were not compensated, and employees were required to pay for uniforms.
Among the requirements of the consent judgment is the fact that the owner must write an article for a restaurant trade publication that discusses an employer's FLSA duties.
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