Los An­ge­les says Carl’s Jr. un­der­paid work­ers, or­ders it to pay $1.45 mil­lion

The Washington Post Sunday - - CAPITAL BUSINESS - BY ABHA BHATTARAI abha.bhattarai@wash­post.com

Los An­ge­les this past week or­dered Carl’s Jr., the fast-food chain per­haps best known for its racy ads, to pay $1.45 mil­lion in back wages, fines and penal­ties for al­legedly pay­ing its work­ers less than the min­i­mum wage.

The city says Carl’s Jr. failed to pay 37 em­ploy­ees at seven area restau­rants the city’s min­i­mum wage of $10.50 an hour, ac­count­ing for $5,400 in un­paid wages be­tween July and De­cem­ber of last year. Dur­ing that time, the fast­food chain was led by Andrew Puzder, Pres­i­dent Trump’s orig­i­nal nom­i­nee for la­bor sec­re­tary. (Puzder with­drew his nom­i­na­tion in Fe­bru­ary af­ter footage sur­faced of his ex-wife say­ing he had phys­i­cally abused her.)

“L.A. law is clear: em­ploy­ees must be paid at least the min­i­mum wage,” City At­tor­ney Mike Feuer said in a state­ment. “Any­thing less is a slap in the face to work­ers strug­gling to make ends meet. This is a ma­jor cor­po­ra­tion that should know the rules.”

For its part, CKE Restau­rants, the parent com­pany of Carl’s Jr. and Hardee’s, said it made “an inad­ver­tent pay­roll er­ror” and called the penalty ex­ces­sive. In an email, a com­pany rep­re­sen­ta­tive said it was “un­rea­son­able.”

In all, Los An­ge­les is or­der­ing the com­pany to pay about $900,000 to the em­ploy­ees within the next month. The com­pany is also be­ing fined $541,000 in penal­ties re­lated to al­legedly vi­o­lat­ing the min­i­mum-wage law, fail­ing to post re­quired no­tice of the cur­rent min­i­mum-wage rate and em­ployee rights in its restau­rants, and block­ing in­ves­ti­ga­tors from in­ter­view­ing em­ploy­ees at two restau­rants. (A city or­di­nance states that com­pa­nies that fail to pay work­ers the min­i­mum wage will owe ex­tra penal­ties of $100 for each day the vi­o­la­tion con­tin­ues.)

Work­ers’ rights ad­vo­cates and le­gal ex­perts said the penalty for un­der­pay­ment, which the city be­gan in­ves­ti­gat­ing af­ter a tip from a Carl’s Jr. em­ployee, is jus­ti­fied.

“When a per­son is caught steal­ing some­thing, they’re not just asked to give it back — they go to jail, they pay fines, they face se­vere penal­ties,” said Aaron So­journer, a la­bor econ­o­mist and pro­fes­sor at the Univer­sity of Min­nesota’s Carl­son School of Man­age­ment. “But when it comes to com­pa­nies that steal from work­ers, for a long time, the stan­dard has been, ‘Well, just pay it back.’ There haven’t been very strong in­cen­tives to fol­low the law and re­spect work­ers’ rights.”

A study re­leased in May by the Eco­nomic Pol­icy In­sti­tute, a left­lean­ing Wash­ing­ton think tank, found that in many parts of the coun­try, roughly 17 per­cent of lowwage work­ers re­ported be­ing paid less than the min­i­mum wage, ac­count­ing for more than $8 bil­lion in lost wages an­nu­ally. Na­tion­ally, the group es­ti­mates that wage theft ac­counts for roughly $15 bil­lion a year in lost in­come, more than the to­tal value of all rob­beries, bur­glar­ies, larce­nies and mo­tor ve­hi­cle thefts in the United States.

“This is a se­ri­ous prob­lem that af­fects a very vul­ner­a­ble pop­u­la­tion,” said De­bra Katz, a Wash­ing­ton-based la­bor lawyer who rep­re­sents work­ers. “Th­ese are peo­ple who are liv­ing very close to the edge. This is not just a mom-and­pop shop that can say, ‘Whoops.’ Carl’s Jr. is a very so­phis­ti­cated em­ployer.”

Puzder, who served as chief ex­ec­u­tive for CKE Restau­rants for 17 years be­fore step­ping down this spring, has been a vo­cal op­po­nent of min­i­mum-wage in­creases.

“The point is sim­ple,” he wrote in a 2014 op-ed in the Wall Street Jour­nal. “The feds can man­date a higher wage, but some jobs don’t pro­duce enough eco­nomic value to bear the in­crease.”

(In an in­ter­view with Busi­ness In­sider in March, he also ad­vo­cated for re­plac­ing work­ers with ro­bots: “They’re al­ways po­lite, they al­ways up­sell, they never take a va­ca­tion, they never show up late, there’s never a slip-and-fall, or an age, sex, or race dis­crim­i­na­tion case,” he said.)

CKE Restau­rants is pri­vately owned by pri­vate-eq­uity firm Roark Cap­i­tal Group and does not dis­close its fi­nan­cials. In fis­cal 2013, when the com­pany was still pub­licly traded, it had $1.33 bil­lion in rev­enue and about $200 mil­lion in prof­its.

JUSTIN SUL­LI­VAN/GETTY IMAGES

Peo­ple protest the nom­i­na­tion of Andrew Puzder as la­bor sec­re­tary in Fe­bru­ary.

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