The City of Los Angeles this 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 fast-food 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, says it made “an inadvertent payroll error” and called the penalty excessive.
“This demand is, on its face, simply unreasonable,” a company representative said in an email.
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 for allegedly violating the minimum wage law, failing to post required notice of the current minimum wage rate and employee rights in its restaurants, and for 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 of the violation.)
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 last month by the Economic Policy Institute, a left-leaning Washington think tank, found that in many parts of the country, roughly 17 percent of low-wage workers report being paid less than the minimum wage, accounting for more than $8 billion in lost wages annually. Nationally, EPI estimates wage theft accounts for roughly $15 billion a year in lost income, more than the total value of all robberies, burglaries, larceny and motor vehicle theft 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-and-pop 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 financial results. In fiscal year 2013, when the company was still publicly traded, it had $1.33 billion in revenue and about $200 million in profits.