Pagliacci Pizza — one of Seattle’s most iconic restaurant chains — recently settled a multimillion dollar class action lawsuit filed back in 2017 on behalf of former and current delivery drivers. The lead plaintiff, former delivery driver Stephen Burnett, alleges that Pagliacci regularly violated Washington’s labor laws by failing to properly disclose to customers where delivery fees were going, inadequately distributing tips, failing to pay car-related expenses, failing to provide adequate rest and meal breaks, and making illegal deductions from Burnett’s paycheck.
Burnett delivered pizzas for Pagliacci from 2015 to 2017, but the allegations in the lawsuit cover all those employed as drivers from October 3, 2014 through January 26, 2021. In order to settle the case, the chain will pay out $3,750,000 to 1,012 members of the class action lawsuit (which works out to about $3,700 per person).
Among the main allegations in the lawsuit was that Pagliacci regularly instituted automatic delivery charges, but did not distribute those funds to delivery drivers, nor did the restaurant disclose to customers where the money was going, as required by Washington law. Pagliacci’s defense to this claim is that customers who ordered over the phone did not receive menus and rarely received receipts, and the restaurant maintains that customers were informed verbally that the delivery fee was not paid to drivers, either while placing their phone orders or by the drivers themselves.
On the subject of tips, the plaintiff claims the chain failed to pay delivery drivers all of the wages to which they were entitled by using mandatory “tip-pools,” a procedure by which Pagliacci requires delivery drivers to give a portion of their tips to non-delivery employees (such as kitchen staff).
Tip pools are not uncommon at restaurants and are legal in Washington state, as long as the restaurant pays a full minimum wage and does not distribute said tips to exempt employees (such as managers). In the course of the legal procedures, the plaintiffs and Pagliacci argued over whether it’s legal to require delivery drivers to tip so-called “back of the house” employees (like kitchen staff), and whether the restaurant actually required such tip pooling at its locations. For what it’s worth, state law does not set limitations on including delivery driver in tip pools, as long as they are paid the minimum wage. Ultimately, a portion of the settlement was allocated to the alleged damages associated with the claim.
There were other compensation issues noted in the lawsuit, notably that Pagliacci allegedly deducted credit card processing fees from delivery drivers’ pay (if a customer paid through a card and wrote a tip on the receipt, then that fee would later be subtracted from the total tip). The suit also alleges that the pizza chain made deductions for purported customer complaints, and didn’t adequately compensate for car expenses. On the latter point, the suit claims the restaurant instituted a flat reimbursement for each delivery trip, rather than taking into account distance traveled. In addition, the plaintiff estimates that he did not receive any reimbursements for at least two “cancelled” deliveries per month.
Regarding breaks, Pagliacci allegedly required employees to select options for “meal benefits” that fell outside of Washington’s labor laws, which require a ten-minute rest break for every four hours of work and 30-minute meal breaks for every five hours of work. The “Designed by Pagliacci” meal deal offered employees free food if they took meal breaks during paid rest breaks, just before or after a shift, or on an unpaid break. If employees wanted to take a 30-minute meal break, they needed to “get in line, order and pay for [the] food and beverage like any other customer,” claims the lawsuit. Thus, it appears that the restaurant tried to incentivize employees to take fewer breaks in exchange for free food.
Pagliacci co-owner Matt Galvin denies the majority of the allegations listed in the lawsuit, but admits for a six-month period starting in 2016 that the restaurant didn’t disclose where delivery service fees were going on receipts or menus as required by state law (that disclosure issue, he says, has since been resolved). Galvin also claims that in all the annual surveys of employees and meetings over the years, rest and meal break issues have not come up, and notes that, on average, drivers make $33 per hour, with benefits, and “tend to stick around.” Galvin says he’s confident the company is following the letter of the law on “any wage or hour issues,” but settling the lawsuit was more cost effective than going through extensive litigation. A final settlement approval hearing is set for July 16.
Since opening its first store in the U District in 1979, Pagliacci has expanded to become one of the most dominant local independent pizza chains in the city. It has 24 locations in the Seattle area, including its headquarters on Capitol Hill, and its playful Ames Bros pizza box art has become as recognizable as Pagliacci slices over the decades. Though the company has mostly held steady during the pandemic, in July 2020 the chain closed its 32-year-old outpost in Queen Anne, the first location to start delivery service. This followed the shuttering of the original U District location in 2018 after 40 years. Pagliacci is still determining what the full impact of the substantial legal costs from the lawsuit will be. “It’s tough for a company of our size,” says Galvin. “But we’re ready to move on.”
Pagliacci is the latest high-profile name in the Western Washington restaurant world to settle a major labor-related lawsuit. In 2019, Tom Douglas’s restaurant group paid out $2.4 million to employees after a class action suit accused the restaurateur’s company of not properly disclosing where service fees were going and failing to provide adequate breaks. Most recently, The Willows Inn — Lummi Island’s acclaimed fine dining destination — settled a $600,000 lawsuit for alleged wage theft. In each instance, the restaurants denied any wrongdoing.