News Law and Policy

Papa John’s Ordered to Pay Almost $800,000 in Wage Theft Case

Jessica Mason Pieklo

The judgment is the latest victory against a fast food company for wage theft and another step in holding corporate owners legally liable for illegal acts of their franchise owners.

A Papa John’s pizza franchise in New York must pay its workers nearly $800,000 in unpaid wages over allegations the business underpaid employees and failed to pay overtime, a state judge ruled last week.

New York Attorney General Eric Schneiderman in December sued Emstar Pizza Inc., which operates seven Papa John’s franchise locations in Brooklyn and Queens, alleging that Emstar underreported hours worked by employees over the past six years, rounded employee hours down to the nearest hour, and did not pay overtime.

Attorney General Schneiderman is also considering legal action against the franchisor, Papa John’s International Inc., on the theory that it is a joint employer and thus liable for the actions of its franchisees, according to reporting from the New York Post.

The National Labor Relations Board in July ruled McDonald’s a joint employer and thus liable for labor or wage violations at its franchise locations in a first-of-its-kind decision that represents a significant victory for workers’ rights advocates. Corporations like Papa John’s and McDonald’s employ about two-thirds of the low-wage workers in this country, but have so far mostly avoided liability for the illegal actions of their franchise owners under the theory that, despite sharing a common corporate brand, each franchise is independently owned and operated.

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Any legal action taken by Schneiderman would build off that July ruling and advance a similar charge that Papa John’s franchises operate through uniform standards tightly controlled by the franchise’s corporate parent.

Should such a theory prove successful, it would make it possible for former employees to collect their stolen wages.

The U.S. Department of Labor reportedly provided information to help Schneiderman with the wage theft case against Papa John’s in New York.

Schneiderman’s judgment against Papa John’s prevents the franchise owner from selling the six stores unless the proceeds from such sale is deposited into an escrow account of the attorney general on behalf of the former employees.

“This judgment sends a clear message that like every other business in New York, fast food employers must follow the law,” Schneiderman said in a statement. “This Papa John’s franchisee brazenly violated the law, shaving employees’ hours and avoiding paying overtime by various means, including giving managerial sounding titles such as ‘head driver.’”

Schneiderman has sued another Papa John’s franchisee, New Majority Holdings LLC, for similar claims wage theft. That case is pending.

News Economic Justice

Wage Theft on Capitol Hill: Cafeteria Workers to Receive $1 Million in Back Pay

Michelle D. Anderson

“Most struggle to afford life’s basic expenses and pay their bills; they shouldn’t have to deal with paychecks that don’t accurately reflect their hard work and the wages to which they are legally entitled,” said David Weil of the U.S. Department of Labor.

Hundreds of people who work in cafeterias that serve U.S. senators and their legislative staffers on Capitol Hill will reportedly receive $1 million in back pay in connection to a United States Department of Labor wage theft investigation.

According to a Washington Post report, 674 food service workers will receive their owed compensation. The back wages break down to about $1,500 per worker.

Officials from the department’s Wage and Hour Division last week said an investigation had revealed the workers were denied prevailing wages that contractor Restaurant Associates and subcontractor, Personnel Plus, were obligated to pay under federal labor law.

Architect of the Capitol, the federal agency that runs the United States Capitol Complex, had contracted the employers.

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The Labor Department said Restaurant Associates and Personnel Plus violated by the McNamara-O’Hara Service Contract Act (SCA) and the Fair Labor Standards Act (FLSA) by improperly classifying workers so that they could be paid wages for lower-paying jobs and by requiring employees to work prior to their scheduled starting times.

One cafeteria worker told the Washington Post in January that his hourly wage dropped to $13.80 an hour from $17.45 after his job title changed from “cook” to “food service worker.”

The employer also failed to pay required health and welfare benefits and violated SCA, which applies to every U.S. government contract valued in excess of $2,500, by failing to adhere to the law’s record keeping requirements.

David Weil, the department’s Wage and Hour Division administrator, said in a statement last week that restaurant industry workers are among the lowest-paid workers in the U.S. economy.

“Most struggle to afford life’s basic expenses and pay their bills; they shouldn’t have to deal with paychecks that don’t accurately reflect their hard work and the wages to which they are legally entitled,” Weil said.

The division is reviewing its findings to determine whether it will keep the Restaurant Associates from securing any more contracts with the federal government.

Labor Department spokesperson Joanna Hawkins told Rewire that the case is still open. She said SCA requires contractors guilty of this violation to be debarred unless the Labor Department’s Wage and Hour Division recommends otherwise “because of unusual circumstances.”

Restaurant Associates spokesman Sam Souccar told Rewire in an emailed statement that the misclassifications were largely attributable to “administrative technicalities related to our Associates’ evolving day-to-day work responsibilities, which in some cases crossed multiple job categories.”

Souccar said the company has since corrected the problem and was “100 percent committed to ensuring classifications [were] accurate going forward.” He also said Restaurants Associates valued its contract with the Architect of the Capitol and implied that the company wanted to continue working with the federal government.

Robert Guiney, president of Personnel Plus and Just Temps Staffing, disagreed with the Labor Department’s assessment. He denied any wrongdoing.

“Restaurant Associates admitted responsibility for the whole thing and they pay our employees,” Guiney said in a phone interview with Rewire. He declined to comment further.

Guiney said the Labor Department had given his company, Personnel Plus, a “clean bill of health,” according to a Courthouse News Service report.

Hawkins said Restaurant Associates is the prime contractor on the government contract in question. She said it was the company’s responsibility to formally advise subcontractor Personnel Plus of the SCA requirements.

“In this case, Restaurant Associates failed to do so. Restaurant Associates took responsibility for that and agreed to pay the back wages owed to the employees of Personnel Plus. Nonetheless, Personnel Plus also failed to pay all of its workers for all hours worked which resulted in additional back wages,” Hawkins said.

Paco Fabián, a spokes for Good Jobs Nation, an advocacy project of the Change to Win labor coalition that focuses organizing federal contract workers who work for low wages, told Rewire via phone interview that policy changes will help prevent wage theft violations.

He cited three labor-related executive actions signed by President Barack Obama, including one that raised the minimum wage to $10.10 an hour.

“It sort of kicked off an increase in minimum wage across the country because he led by example,” said Fabián, who noted that the cafeteria workers remain without union representation.

Fabián said policy changes should aim to create a system in which the most ethical bidder, rather than the lowest bidder, will be awarded a government contractor. Lowest bidders are more likely to engage in wage theft violations, Fabián said. “We want to create a system that gives preferences to companies that provide living wages and benefits and to freedom to form unions without retaliation,” he said.

Joseph Geevarghese, director of Good Jobs Nation, said in an emailed statement the recent $1 million award was the result of activism. In recent years, U.S contract workers and allies have gone on strike and filed legal multiple complaints.

“This shows that when workers act, workers can win,” Geevarghese said.

Last year, for example, more than two dozen Senate aides brought their own lunches to work and boycotted meals being served on Capitol Hill during a union drive among the cafeteria employees. Sen. Sherrod Brown (D-OH) was among those to join the boycott, according to Al Jazeera.

Sens. Brian Schatz (D-HI) and Harry Reid (D-NV) are among lawmakers who have shown support for reform on behalf of the food workers. Reid has said the federal government should stop working with the Restaurant Associates, according to an Associated Press report.

Geevarghese urged Obama to sign the Model Employer Executive Order that was recently added to the Democratic Party platform.

News Economic Justice

Wage Theft Could Cost $32 Million Weekly for Pennsylvania’s Low-Wage Workers

Michelle D. Anderson

Advocates say that government oversight is weak, and laws only provide a slap on the wrist when they are enforced. Pennsylvania—much like the federal government—lacks enough regulators.

The U.S. Supreme Court’s recent refusal to consider a case involving several thousand Walmart employees brought attention to what employment advocates in Pennsylvania call a hidden crisis: wage theft.

Legal aid agencies and advocacy organizations such as the Pennsylvania-based Women’s Law Project use the term to describe employers’ refusal to pay wages due their workers.

“Shortchanged: How Wage Theft Harms Pennsylvania’s Workers And Economy,” a study released by the Sheller Center for Social Justice at Temple University’s Beasley School of Law, revealed that cooks, dishwashers, and food preparers, along with stock/office clerks and retail salespeople, were among the largest low-wage worker groups experiencing weekly minimum wage violations.

Employers commit wage theft by paying a daily rate that does not meet Pennsylvania’s $7.25 hourly minimum wage requirements, misclassifying people who work as independent contractors, paying in cash, failing to keep adequate records, and taking money out of paychecks to account for uniforms, supplies, and other products necessary to perform the job.

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Terry L. Fromson, managing attorney at the Women’s Law Project, a public interest legal center, told Rewire that the practice compromises women’s economic security in Pennsylvania, where women make up about two-thirds of people who work for minimum wage, and where the minimum wage is the lowest allowed by federal law.

“Factor in losing 15 percent of a would-be paycheck to wage theft, and a family led by a primary or sole breadwinning mother sinks further into poverty,” Fromson said.

In the Walmart case, first decided by a Philadelphia jury in October 2006, 186,000 current and former employees from the retailer’s Pennsylvania stores were awarded $187 million in a class action suit for unpaid wages that were withheld between March 1998 and April 2006.

The workers’ counsel, Donovan Litigation Group, said the employees had been owed $140 million of the $187 million and will now split $224 million due to interest, according to the Philadelphia Inquirer.

Walmart had appealed the decision in 2006, taking the case to Pennsylvania’s Supreme Court, who affirmed the jury verdict in 2014. U.S. Supreme Court justices on April 4 decided to not take up the case and to support the state’s high court decision.

In the years since Walmart employees first took action, workers and legal aid agencies across the United States, including in Pennsylvania, have brought many more wage theft cases.

Last year, for example, more than three dozen people who work for low wages at the Denver-area Carniceria y Verduleria Guadalajara grocery store won $305,000 in back wages and penalties in a U.S. District Court ruling using federal and state “wage theft” laws.

Papa John’s franchisees in New York were found guilty of wage theft last year and ordered to pay back more than $500,000 to settle claims that they swindled employees out of earned income.

There remains, however, little information as to how prevalent wage theft has become across the country, advocates for low-wage workers told Rewire. The Sheller Center last year sought to fill the void in wage theft data in Pennsylvania.

The study, which used the state’s right-to-know law to obtain data from the Pennsylvania Department of Labor and Industry (DLI) and relied upon extrapolations rather than original data, found that the state’s people who work for low wages, on average, lose about 15 percent of the their earnings to wage theft.

The study suggested that nearly 400,000 people who work in Pennsylvania experience a minimum wage violation and more than 300,000 experience an overtime violation every workweek. The weekly loss amounts to an estimated $19-32 million in wages, according to the “Shortchanged” authors.

The study revealed that the DLI, the state agency responsible for handling wage theft matters, was unable to collect wages in more than half of the complaints filed by people who work.

In fact, despite closing 5,000 cases annually, the DLI collects wages in about 2,000 of those incidents, according to the Temple University study.

The U.S. Department of Labor in a study released last year acknowledged the prevalence of wage theft among wage and salary workers in California and New York.

The report concluded that more than 300,000 people who work in those states were victims of wage theft. Many of those affected, the federal study revealed, work in service-based positions in the restaurant and hotel industries and were more likely to be women, people of color, and undocumented people.

Undocumented residents in New York, for example, were 3.1 times more likely to experience wage theft.

A local report released by Centro de Trabajadores Unidos en Lucha in Minneapolis found that nearly half of low-wage workers in the Twin Cities have experienced wage theft.

Nadia Hewka, senior attorney at Community Legal Services, a Philadelphia-based legal aid outlet, said many businesses exploit undocumented workers’ vulnerabilities.

“Employers cut corners—some of them will choose to hire immigrant workers because they think they won’t complain,” Hewka told Rewire.

At Community Legal Services, Hewka said many people who work don’t know they are entitled to overtime and often seek to recover wages after they haven’t been paid for extended periods of time.

“That often happens with immigrant workers who are not familiar with laws in the U.S.,” said Hewka, co-founder of the Pennsylvania Immigrant Workers Rights Coalition.

The “Shortchanged” authors noted that undocumented workers fear their supervisors will call immigration authorities, while immigrants with employment visas are often afraid they may lose visa privileges if they speak up.

Identifying Wage Theft

The Temple University study, which excluded low-wage employees in more rural settings, like farm, forestry, and fishing workers, outlined the many ways employers get away with wage theft.

The report relied upon a landmark investigation released in 2009 called “Broken Laws, Unprotected Workers,” which surveyed low-wage workers in Chicago, New York City, and Los Angeles.

The “Broken Laws” study estimated about 90 percent of home health-care workers were victims of off-the-clock violations.

Philadelphia resident Natasha, whose last name was withheld by the “Shortchanged” authors, was a victim of wage theft while working as a home health-care worker.

Her employer, who often avoided workers and created barriers to keep employees from engaging each other about their paychecks, failed to compensate Natasha for travel time between client homes and even missed paycheck due dates.

The mother of four, who made $9.50 per hour and witnessed her boss call the police on coworkers who complained about wage theft, was ultimately fired after becoming ill despite her stellar attendance and documented excuse for missing work.

“I was so frustrated and I wanted to break down and cry because I couldn’t spend another week not being able to feed my children, having to choose between bread, eggs or milk,” she said, according to the study. “It was the worst experience of my life.”

Advocates for people who work low-wage jobs contend that wage theft also hurts the state’s economy, because money that would otherwise be spent in the economy is stolen from people who work, while businesses evade taxes that could be used to fund schools and road projects.

Law-abiding businesses may struggle to compete with enterprises that steal wages, advocates said.

The U.S. Department of Labor study noted that the burden of wage theft ultimately shifts from the private sector to the government because people who work for low wages will seek public assistance if their pay is insufficient.

People who work for low wages and their allies have looked to key policy changes to address wage theft, though it’s proven difficult because of resistance in Pennsylvania’s Republican-controlled legislature, Hewka said.

Some measures proposed during the 2015-2016 legislative session, like HB 250, which sought to raise the penalty for wage theft and for retaliating against an employee for reporting said theft, get stuck in committees and die there, she said.

A resolution to discharge the house’s labor and industry committee from further consideration of HB 250 was presented in October 2015.

Legislators in other states have proposed measures aimed at addressing wage theft. Democratic lawmakers in Wisconsin last year proposed legislation that would allow the state’s Department of Workforce Development to charge interest on unpaid wages and levy fines up to $1,000 per violation against employers who break state wage theft laws.

Hewka added that government oversight, overall, is weak and laws only provide a slap on the wrist when they are enforced, she said. Pennsylvania—much like the federal government—lacks enough regulators, she said.

In Pennsylvania, the Minimum Wage Act and the Wage Payment and Collection Law are the protections low-wage workers can rely on to reclaim stolen wages.

The Wage Payment and Collection Law limits penalties to the higher of $500 or 25 percent of wages owed, and includes criminal fines limited to $300.

The state’s minimum wage law, on the other hand, doesn’t offer any damages to people who work low-wage jobs, unlike federal law.

“Shortchanged” authors have recommended harsher penalties for employers, including business license revocation and allowing people who work to place a hold on employer’s property until they receive unpaid wages.

Other solutions encourage state policymakers to collaborate with community groups to target investigations and to create a process for workers to submit anonymous or confidential complaints.

The state has enjoyed some successes in battling systemic wage theft against people who work.

Philadelphia City Councilman William “Bill” Greenlee sponsored a bill that will create a wage-theft watchdog in the city’s Managing Director’s Office.

The bill, which was unanimously approved by the council in November, requires a wage-theft coordinator to respond to worker complaints and find victims who may lack education about their rights.

The coordinator will be responsible for looking at thefts of anywhere between $100 and $10,000, and can revoke business licenses and impose a city fine of $2,000 per incident.

Hewka, who worked with Greenlee on the measure, said the city should be prepared to handle complaints in July.

The measure, she said, will offer relief to low-income citizens who cannot afford a private lawyer and legal aid groups who can only provided a limited amount of free services.

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