Fast food franchises top the list of wage and hour violators for the past thirteen years, according to a CNN analysis of data obtained from the Wage and Hour Division (WHD) of the federal Department of Labor (DOL). CNN identified Subway, McDonald’s, and Dunkin’ Donuts as the franchises with the most investigations, violations, and fines from 2000 to 2013. All three of these companies are franchises with thousands of locations around the country, meaning that the parent companies are not responsible for employment matters at many individual restaurants. Franchisees, independent businesses that operate one or more restaurants under a franchise agreement with a parent company, are usually the ones held liable for wage violations. The system of allowing hundreds or thousands of small businesses to operate individual franchises is part of what is sometimes called the “fissured workplace,” which makes widespread enforcement of minimum wage and other employment laws difficult.
The Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., requires payment of a minimum wage, currently $7.25 per hour, to employees. States and cities may set the minimum wage at a higher rate. Employers must pay hourly workers time-and-a-half for overtime, generally defined as more than forty hours in a week. Common violations include requiring additional, unpaid work from employees, such as time spent changing into or out of work uniforms or equipment. When added to paid hours, this additional time may reduce an employee’s effective hourly rate below minimum wage. The WHD investigates alleged violations of these wage laws, and employees may bring lawsuits to recover back pay and other damages.
Subway has more than 26,000 locations in the U.S., the most of any fast food franchise. CNN’s analysis of the WHD data found more than 1,100 investigations of Subway franchisees from 2000 to 2013, which identified about 17,000 violations of the FLSA and resulted in employee reimbursements of over $3.8 million. Common violations included requiring deduction of a thirty-minute lunch break, regardless of whether the employee took a break, and refusing to pay employees for required closing procedures.
In situations where a company owns and operates all of its locations, the WHD can pursue an enforcement action directly against the company. In 2012, for example, the WHD obtained $4.83 million in back wages and damages from Wal-Mart. Franchise agreements, however, often provide that franchisees, not the parent company, are responsible for employment matters at individual restaurants. The WHD must pursue individual franchisees for wage violations.
Employees can bring lawsuits directly against their employers under the FLSA, which can bring relief to employees at that particular location. Enforcement against multiple franchisees, or across an entire franchise chain, can be difficult. The WHD worked with Subway’s parent company last year in an effort to increase FLSA compliance among its franchisees.
David Weil, who recently became administrator of the WHD, coined the term “fissured workplace” in a book published earlier this year. It refers to the increasing tendency of large companies to delegate roles and responsibilities to smaller companies, often at the expense of employee wages, benefits, and job security. This includes the use of franchisees to operate individual locations.
If you need to speak to an employment attorney in New Jersey or New York regarding a wage claim or another employment law matter, please contact the Resnick Law Group today at 973-781-1204 or (646) 867-7997.
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Lawsuit Alleges Employer Failed to Provide Adequate Restroom Breaks, The New Jersey Employment Law Firm Blog, May 13, 2014
McDonald’s Faces Multiple Lawsuits in New York for Alleged Wage Violations, The New Jersey Employment Law Firm Blog, April 18, 2014
New Jersey Law Against Discrimination Now Protects Workers from “Salary Secrecy” by Prohibiting Retaliation for Inquiring About Wage Discrimination, The New Jersey Employment Law Firm Blog, March 31, 2014
Photo credit: By Dwight Burdette (Own work) [CC-BY-3.0], via Wikimedia Commons.