Jon Young, shown after the 2016 opening of Pipe Dream Brewery in Londonderry, and brewery co-owner John Bacheller of Tewksbury have been cited by the U.S. Department of Labor for withholding more than $900,000 in employee tips and overtime wages. (CARL RUSSO/Staff file photo)
LONDONDERRY — The owner of Pipe Dream Brewing says the wrong word used in its credit charge payment system led to a federal investigation involving withheld tips and wages of its employees.
On Tuesday, the U.S. Department of Labor announced it had recovered $456,297 in back wages and withheld tips and a matching amount in liquidated damages from the brewery – amounting to $912,000.
The brewery was accused of illegally keeping its workers’ credit card tips, denying overtime wages and violating federal law for the types of employees who can receive pooled tips. Pipe Dream Brewing agreed to pay $5,148 in a fine for tip-related violations.
Pipe Dream Brewing is a West-coast inspired brewery and taproom offering 28 beers made on site. It’s been in operation since 2016.
John Bacheller, who owns the brewery at 49 Harvey Road with co-owner Jon Young, said the term “tip” was being input in its payment system when they should have used “service charge.”
“What we did was wrong, but it wasn’t malicious,” Bacheller said. “It was for lack of a better word, just ignorance. We didn’t know that we couldn’t use the word tip.”
In October, state and federal investigators looked into a customer’s social media post which questioned the brewery’s tipping policy after asking a bartender what happens to credit card tips.
Pipe Dream Brewing intended to implement a service charge to benefit all staff, not only the ones providing table service, and have tips split equally, the owner said. The tip pool benefited the bartenders, cooks, dishwashers, beer brewers and other employees who worked behind the scenes.
The idea behind the service charge was also to ensure employees could earn higher wages than industry standards at the brewery and receive health care benefits, Bacheller said. The service charge was improperly labeled as “tips” in the payment system when customers paid their bills.
There was an understanding and transparency among employees and the employer about its tipping process, according to a statement from Pipe Dream Brewing.
Bacheller said the brewery is not a restaurant and felt a tip pool was a fair solution for providing equal tips for all employees. Some businesses have added service charges to their bills to be able to offer employees better wages and pay their health insurance. Bacheller added he felt his employees were happy with the tipping system and working at the brewery and hadn’t heard otherwise.
“I think we’re ahead of the curve with the service charge, but we made a mistake,” he said.
The brewery pays its workers up to $24 an hour, he added. Full-time employees received health insurance benefits along with quarterly bonuses from the credit card service charge, which was improperly labeled as “tips” in the POS system.
“We were wrong because we used the word tips on our point of sale purchase,” Bacheller said. “But our employees weren’t receiving minimum wages.”
Only one employee has left since October, Bacheller said.
Since the investigation, the issue has been corrected in the brewery’s sales system and has changed to be labeled as a service charge, not tip. Every bill now at Pipe Dream Brewing gets a service charge.
“Pipe Dream never intended to mislead any customers or employees, and for this, we sincerely apologize,” the company’s statement read. “And now, we are using the right words.”
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