Chickie’s & Pete’s Lawsuit Settlement Announced

Chickie’s & Pete’s has announced that the company has reached a settlement with the United States Department of Labor regarding those questionable practices relating to tips for its employees. (Mario Batali settled a tips lawsuit in 2012 for $5.25 million.)

Here’s the press release from Chickie’s & Pete’s spokesperson Kevin Feeley:

Global settlement also resolves lawsuits by former employees regarding complex federal regulations on “tip pool” and “tip credit” practices

Owner Pete Ciarrocchi, Jr. announced today that, subject to court approval, Chickie’s & Pete’s, the No.1 sports bar in America, has reached a proposed settlement with the United States Department of Labor (DOL) regarding the company’s pay practices for its tipped employees.

The settlement, which follows a year-long investigation in which Chickie’s & Pete’s worked cooperatively with the DOL, was filed today as a proposed consent judgment in the U.S. District Court for the Eastern District of Pennsylvania. If the settlement is approved by the court, the company will pay approximately $6.6 million to more than 1,100 of the 1,665 employees who worked at 12 different locations throughout the region over the last three years.

At the same time, the company announced that it has reached a $1.68 million settlement with approximately 90 current and former employees who filed federal lawsuits that included many of the same allegations raised in the DOL matter.

“Our employees are the backbone of our company,” Ciarrocchi said, “and they deserve our respect and appreciation. We believe these settlements are in their best interests, and we worked cooperatively with the DOL and with plaintiffs’ counsel to make them happen.

“We decided to resolve all of these claims at the same time because it’s the right thing to do,” said Ciarrocchi. “We look forward to working together to serve our customers even better as we continue to grow our business.”

Chickie’s & Pete’s is by no means the first restaurant company to face scrutiny of its tipped employee pay practices. In fact, hundreds of restaurant operators across the country – ranging from mom-and-pop operations to industry giants like Mario Batali (who in 2012 reached a $5.25 million settlement), Bobby Flay, Outback Steakhouse, and Darden Restaurants (owners of Olive Garden, LongHorn Steakhouse and Red Lobster) – have been subjected to similar allegations challenging their compliance with federal and state law rules regarding “tip pools” and “tip credits.”

In its investigation, the DOL alleged that Chickie’s & Pete’s operated a tip pool – a common practice in the restaurant industry whereby a portion of the tips received by servers are shared with other employees – that was not limited to front-of-the-house employees such as servers, bartenders, and busboys, and was not otherwise properly operated. As a result, the DOL claimed that Chickie’s & Pete’s could not benefit from a federal tip credit – which allows restaurant operators to pay a reduced cash wage and credit a portion of their employees’ tips towards the full federal minimum wage. Even though most Chickie’s & Pete’s employees received wages and tips that, together, exceeded the federal minimum wage during this period, the DOL alleged that its tip pooling arrangement did not comply with federal guidelines and that Chickie’s & Pete’s owed back wages for the differential between the reduced wage and the federal minimum wage as well as tip amounts not reserved for front-of-the-house employees. Much of the proposed DOL settlement resolves these and related compensation issues.

“I’ve always said that we want to do the right thing by our employees, many of whom are families who have worked with us for many years,” Ciarrocchi said, “and that’s what we are doing.”

From the start of the investigation, Chickie’s & Pete’s chose to cooperate and negotiate a settlement of the DOL’s allegations. In fact, in February 2013, shortly after the investigation began and more than a year before the settlement, Chickie’s & Pete’s voluntarily returned money to its servers and bartenders for 2012.

Upon receiving notice of the investigation, Chickie’s & Pete’s also undertook a comprehensive internal review of its tip credit, tip pooling, and other wage and hour practices. Independent of the DOL’s investigation, the company has worked to improve its wage and hour practices to ensure continued compliance with the law. As part of the settlement, Chickie’s & Pete’s will implement a comprehensive training program for management and employees regarding the obligations and responsibilities under the federal Fair Labor Standards Act and other wage and hour laws.

“The complex array of regulations governing tip pool arrangements and the tip credit can be a significant stumbling block for restaurant owners seeking to comply with federal and state wage and hour laws,” added Anthony Haller of Blank Rome LLP, the Philadelphia-based law firm that represented Chickie’s & Pete’s throughout the DOL investigation. “Given the fact that hundreds of restaurant operators from coast-to-coast have faced similar allegations, every restaurant operator would be well-served to review and monitor their compliance with these requirements.”

The companion lawsuits filed by former employees focused largely on the same issues, and the resolution of these claims follows the DOL settlement.

“Today’s settlement is an excellent outcome for Chickie’s & Pete’s employees and for the company,” said Louis Pechman, of Berke-Weiss & Pechman LLP, attorney for the employees in the litigation. “Many restaurant operators across the country have faced similar issues relating to tip pools and tip credits, and this recovery represents Pete Ciarrocchi’s good faith efforts to make his employees whole.”

Along with Pechman, the plaintiffs in the litigation were represented by Gerald D. Wells III of Connolly Wells & Gray LLP, Robert O’Brien of O’Brien, Belland and Bushinski LLC, and Sherrie R. Savett of Berger & Montague, P.C., among others.