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Labor Department case a cautionary tale for California bars

Recently we discussed minimum wage laws in California for tipped employees. Federal law mandates that restaurant owners pay employees the difference between the federal tip wage of $2.13 and federal minimum wage of $7.25 if their tips don't get them to that amount. Those who don't do that are violating the law.

Now comes news of a settlement in what the U.S. Department of Labor says is one of its biggest-ever cases involving tip violations. A Philadelphia-based company, Chickie's & Pete's, and its owner have agreed to pay over $6.8 million for violating overtime and minimum wage laws. The company operates nine sports bars in Pennsylvania and New Jersey.

The company's actions were termed "egregious" by Labor Secretary Thomas E. Perez. According to federal investigators, the company was cited for repeated instances of failing to "top off" wages to meet the federal minimum and for not paying even the required $2.13 per hour for tipped employees. Servers and bartenders were reportedly paid $15 per shift at most of the locations, which often did not average out to $2.13 per hour.

There were further violations, according to the Labor Department. Investigators discovered that waiters were required to put two to four percent of their food and drink sales into a tip pool, over half of which was reportedly kept by the owner. Sometimes the bars took a percentage of employees' tips.

This $6.8 million-plus penalty isn't the only financial damage Chickie's & Pete's is suffering as a result of its violations. The company said it is settling a lawsuit nearly 100 former and current servers for $1.68 million for wage and hour violations.

A company spokesman said they "understand there might need to be some changes in the tip pool and tip credit practices." The company will be monitored for 18 months and must educate employees on their rights regarding wages and tips.

Laws mandating how workers in California and nationwide are paid are in place to help prevent such violations. Sadly, some employers simply ignore them. That's why there are legal remedies for workers who have not been paid properly or who have been subject to misclassification of wages. In this case, in addition to employees taking civil action, the federal government stepped in. As Secretary Perez noted, "Tipped workers deserve better and this action shows that the Department of Labor is ready to stand up for them."

Source: The New York Times, "Sports Bar Chain Agrees to Pay $6.8 Million for Violating Wage Laws" Steven Greenhouse, Feb. 20, 2014

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