In Philly, ‘Pete’s Tax’ refund to employees: $8.5 million — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

In Philly, ‘Pete’s Tax’ refund to employees: $8.5 million

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in Compensation and Benefits,Human Resources

The Philadelphia-based Chickie’s and Pete’s sports bar and restaurant chain has agreed to settle charges it stole tips from employees and failed to pay the federal minimum wage.

The U.S. Department of Labor’s Wage and Hour Division investigated the charges and restaurant ownership cooperated completely. It will pay $8.52 million to settle the complaints.

Investigators zeroed in on several key policies that violated the Fair Labor Standards Act (FLSA). Most notably, the company would pay waitstaff $15 per shift regardless of the hours worked. Often that meant employees received less than the $2.13 per hour minimum wage for tipped employees.

The company would then deduct 2% to 4% of table sales, a practice employees called “Pete’s Tax.” Waiters and waitresses were required to pay the “tax” in cash at the end of their shifts. Since many times their tips were on credit cards, they would borrow money from co-workers to cover the shortfall. “Pete’s Tax” was then divided, with 40% going to bartenders, which is legal. More­­over, the rest went to the restaurant or management in violation of the FLSA and federal regulations on tip pooling.

Investigators also found the company failed to pay workers minimum wage and overtime for hours spent attending mandatory training.

Note: The more complex and un­­usual an employer’s pay scheme is, the more likely it will invite regulatory scrutiny. Employers should have legal counsel review any pay system that allows for unusual deductions, tip pooling, or fails to pay overtime.

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