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The U.S. Department of Labor filed a federal lawsuit Jan. 30, accusing Portland chain Pizzicato and its owners of stealing employees’ tips and employing an underage delivery boy.
The federal complaint alleges Pizzicato “unlawfully required employees at its locations to share a portion of their tips with general managers, assistant managers, and kitchen managers” and “failed to maintain, keep and preserve records of tips,” all violations of the Fair Labor Standards Act. The agency is trying to recover the money for the 367 line employees who worked at the chain since Jan. 5, 2020.
Pizzicato owner and founder Tracy Frankel says she was caught be surprise by the investigation. She says the business keeps “fastidious records” and the accusations of stealing tips were a result of a misunderstanding of federal law, although she admitted they had employed an underage driver. “The 17-year-old was going to turn 18 in a month,” she said. “The general manager didn’t know.“
The larger issue here is a question of how restaurants can organize a tip pool, in which restaurants collect tips and distribute them to both servers and cooks. Oregon, which requires tipped employees to be paid a full minimum wage, is one of a few states that allow tip pooling.
The Department of Labor is accusing Pizzicato, as it recently accused McMenamins, of distributing those tips to supervisors, which is against the law.
Pizzicato says it splits tips with managers because they, too, serve customers. It has various levels of managers, from assistants to “general managers,” who perform front-of-house duties serving customers, Frankel says. “Our managers and assistance managers work shoulder to shoulder with line staff,” she said. “We’ve always tipped everyone equally.”
Still, Pizzicato is settling the allegations—for north of a half-million dollars, according to a letter forwarded to WW by CEO John-Felix Rippel and signed by the chain’s founders, Tracy and Marc Frankel.
“What we did ‘wrong’ many other fast-casual restaurants in Portland do too,” reads the letter. “Tracy and I will have to go into our retirement savings to lend the company money to avoid having it go into bankruptcy.”