Chickie's & Pete's paying for its tips & tricks

Posted: February 27, 2014

Chickie's & Pete's was the nation's best sports bar, ESPN proclaimed. To more than 1,000 of the Philadelphia institution's employees? Not so much.

Servers were forced to contribute 2 percent to 4 percent of total table sales to management in what was known as "Pete's Tax," named for owner Peter Ciarrocchi Jr., who proved to be less than sporting.

Waiters were not paid minimum wage, overtime, or training. At nine locations, some servers and bartenders earned $15 for an entire shift.

To resolve a U.S. Labor Department investigation, Chickie's & Pete's has agreed to pay $6.8 million to employees for back wages and damages, which is a whole lot of Crabfries®.

This is huge, one of the largest tipped-worker cases in years. For perspective, the settlement represents almost a fourth of all back-wage violations cited last year by the Labor Department in nearly 4,000 cases. The chain will also pay $1.68 million to settle federal lawsuits filed by current and former employees.

"Restaurant servers are among the lowest-paid workers in the country," said Laura Fortman, principal deputy administrator for Labor's Wage and Hour Division. "No one who works a full-time job should have to live in poverty."

The food industry can be particularly egregious in exploiting staff. Many restaurant workers are immigrants, single mothers (women represent 64 percent of all servers), and less-educated people with few means who are rarely equipped to fight back. Many workers are unaware of their rights. New York lawyer Louis Pechman, who represented servers in the lawsuit, has filed more than 100 cases against restaurants in his state. He runs a website - WaiterPay.com - informing workers of their rights. The first of 10 top violations listed: "Management Stealing Tips."

Former waitress Denise Cinousis worked at Chickie's & Pete's near the ballpark. "It was disgusting. He was taking money from us left and right," said Cinousis, one of the lawsuit's plaintiffs. The Labor Department determined that only 40 percent of collected tips went to bar staff - which is legal (but normally done by servers) - while management pocketed the rest, which is not. "It's money that's owed to us," Cinousis said. "I wanted it to stop so he wouldn't do this to anyone else."

Ciarrocchi, whose parents were the original Chickie and Pete, is normally a garrulous sort. "I love being Pete," he once told Philly Mag. "It's like Cher. Madonna. Pete!" Except Cher and Madonna, as far as we know, don't impose their own tax.

Pete issued a statement that the settlement was "the right thing to do" and that "our employees are the backbone of our company," but otherwise has let his accomplished attorney and spokesman do the talking. They tried to convince me that the Labor Department had been aggressive in its statements, that the laws concerning tip credits were murky and complicated. "We worked with the Department of Labor and resolved this very quickly and cooperatively," said lawyer Anthony Haller of Blank, Rome. "Pete made a mistake. The mistake had consequences. He dealt with the consequences."

But the mistake might never have been caught, with about $8.5 million in total consequences, had people like Cinousis not bravely come forward to make a claim.

"There are many nuances and weird things going on in hospitality that are difficult to comply with. These things can be funky," said David Sherwyn, an authority on hospitality legal issues at Cornell University. "But the 'Pete Tax' is unconscionable. This is a poster child for how you violate the law. You can't take people's tips."

Carolyn Lapps, another plaintiff and Cinousis' sister, said of her colleagues: "A lot of them were single mothers. They need this money. I have a lot of student loans. Knowing that someone is taking money that shouldn't be taken, it's heartbreaking."

Lapps told me, "I've never wanted to sue someone. But I felt this was a justified reason."

If the servers won, Lapps believed, she might get $100. Her settlement is considerably more, five figures. "Knowing all these women with kids are getting $10,000 or $20,000, they absolutely deserve this, and I'm happy for them all."

As well she should be. After all, they're getting money they have already earned.


kheller@phillynews.com

215-854-2586 @kheller

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