By Pat Loeb

PHILADELPHIA (CBS) — A popular Philadelphia sports bar has agreed to pay its servers more than $8 million in back wages and damages.

Chickie’s & Pete’s, with more than a dozen locations around the Delaware Valley and beyond, has entered into a consent decree with the US Department of Labor to settle what the department calls its largest tip-credit case ever.

At the same time, Chickie’s & Pete’s is settling several lawsuits filed by employees.

Brian Johnson, the Labor Department’s regional director of enforcement for the wage and hour division, says a yearlong investigation at nine locations found that the chain required its wait staff to contribute to a tip pool, then kept 60 percent of it.

“Tips are the property of the employees who receive them,” Johnson said today. “Management is not allowed to participate in the tip pool.”

Nonetheless, Johnson says, the tip pool was part of the chain’s business model.

“They kept detailed records on the tip-out amounts and disciplinary action was threatened if they did not tip out at the end of the night,” he tells KYW Newsradio.

Johnson says the money — which servers referred to as “Pete’s tax” — had to be paid in cash at the end of the night even if the server’s tips had all been charged to credit cards.

“They were required to go into their wallet to pay the tip-out amount, or go to an ATM, or borrow from a co-worker,” according to Johnson.

He says the investigation also found that the chain failed to pay the tipped-worker minimum wage of $2.13 an hour, didn’t pay overtime, didn’t pay at all for mandatory meetings and training, and charged the workers for uniforms.

Chickie’s and Pete’s owner, Pete Ciarrocchi Jr., said in a statement that he is settling the government complaint and the lawsuits in an effort to “do the right thing by our employees.”

“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.”

In addition to the $6.8 million in compensation, which will be divided among 1,159 employees, the agreement includes a $50,000 civil penalty and several enhanced compliance measures, including 18 months of external monitoring, with an additional 18 months of internal monitoring, and training for employees about their rights.

Also, Ciarrocchi will write an article for a restaurant trade publication that addresses an employer’s obligations under the federal Fair Labor Standards Act.

“When we do an investigation, of course it’s about the workers involved, but it’s also about a lot more than that,” Johnson says. “The goal is to assure that the employer maintains compliance with the Fair Labor Standards Act and, in a larger sense, to make sure the industry maintains compliance. The enhanced compliance measures of the settlement do just that.”

In addition to resolving the Labor Department’s investigation, the company reached a $1.68-million settlement with approximately 90 current and former employees who filed federal lawsuits that included many of the same allegations.

“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.”