Puzder’s Qualifications for Secretary of Labor Challenged

By Allen Smith, J.D. Jan 9, 2017
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​Secretary of Labor nominee Andrew Puzder (Photo by Gage Skidmore)

​Andrew Puzder's compliance record as CEO at CKE Restaurants (the parent company of the Hardee's and Carl's Jr. burger chains) comes up short for a nominee to be secretary of labor, say congressional Democrats. Department of Labor investigations have turned up violations of workers' rights in more than half of inspections of Hardee's and Carl's Jr. restaurants,  a group of senators said in a letter to Sen. Lamar Alexander, chairman of the Senate Committee on Health, Education, Labor and Pensions. 

Senators Patty Murray, D-Wash., Elizabeth Warren, D-Mass., and 21 other Democratic senators asked that Puzder's Jan. 17 confirmation hearing include witnesses who can provide information about Puzder's role in the treatment of workers. However, views of Puzder's compliance while at CKE vary; some industry experts say CKE's violations under his leadership have been minimal compared to those of the company's competitors.

California Class Actions

"The company is facing several potential class-action lawsuits by its employees regarding disputes over wages and meal and rest breaks," the senators stated in their letter. "Other allegations at CKE restaurants have raised concerns about compliance with health and safety standards."

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The Democrats' letter echoed worker groups' concerns. CKE Restaurants "has a long history of being named in class-action lawsuits alleging failure to fairly compensate fast-food outlet managers for overtime," said Christine Owens, executive director of the National Employment Law Project, an organization headquartered in New York City that advocates on behalf of low-wage workers. "It's perhaps not surprising, then, that when the current Labor Department conducted 4,000 investigations into the 20 largest fast-food brands, over half of Carl's Jr. and Hardee's restaurants had at least one wage and hour violation."

In a 2012 Securities and Exchange Commission disclosure, CKE noted, "With respect to employment matters, our most significant legal disputes relate to employee meal and rest break disputes and wage and hour disputes. Several potential class-action lawsuits have been filed in the state of California." It added, "The company intends to vigorously defend against all claims in these lawsuits."

In one California class action, Cubias v. Carl Karcher Enterprises Inc., CKE allegedly unlawfully failed to reclassify general managers as nonexempt in violation of the California Labor Code. The general managers had to devote more than 50 percent of their time to nonmanagerial tasks that could be performed by hourly employees in violation of state law, the complaint maintained. These tasks included working the cash register, cleaning, preparing food and handing food to customers.

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

The class action also maintained that CKE:

  • Did not provide required meal and rest breaks.
  • Failed to pay an additional hour of pay, as required in the state of California when meal or rest breaks aren't provided.
  • Refused to pay overtime wages.
  • Failed to provide an itemized statement of wages that accurately stated the total hours worked by each general manager.
  • Did not pay vacation pay and all wages due at the end of employment.

In another California class action, Duarte v. Carl Karcher Enterprises Inc., the complaint maintained that CKE unlawfully refused to pay general managers in California for the actual hours of on-call work that they performed, as well as overtime for on-call work.

" 'Build-in time' is the only compensation that general managers in California receive for on-call work," the complaint stated. For example, if a general manager spent three hours in a week on the phone answering questions from restaurant employees, he or she would be paid only the standard one hour of build-in time—CKE's term of art for capping on-call work to an hour—for that week and would not receive any other compensation for the other two hours on the phone.

"CKE has litigated very vigorously," said Allen Graves, the plaintiffs' attorney in both cases, of The Graves Firm in Sierra Madre, Calif., in an interview with SHRM Online. Both cases are still pending.

Federal Litigation Against Franchisor Limited

While state law wage and hour litigation against CKE has proliferated in California, the company faces far less litigation brought under federal law by the U.S. Department of Labor (DOL) Wage and Hour Division.

The division does not have any open investigations of CKE establishments, according to a DOL spokesman. As for past litigation, he told SHRM Online that there was an investigation of Hardee's headquarters that started in 2006 and ended in 2007. That investigation found overtime violations at corporate-owned stores due to a failure to include bonuses in the regular rate of pay used for overtime calculations. CKE paid $58,001 in back wages for 456 workers.

Franchisors like CKE typically refrain from getting too involved in the business of their franchisees for fear of being held liable for their franchisee's labor violations, noted Justin Barnes, an attorney with Jackson Lewis in Atlanta.

"As a practical matter, many franchisees are small, unsophisticated businesspeople," said Steven Suflas, an attorney with Ballard Spahr in Denver. "It is typical for franchisors to provide suggestions for employment policies and practices in order to assist them in setting up their businesses. Also, the franchisor has an interest in protecting the brand from both public and governmental criticism. The press seldom identifies a franchisee with wage and hour law violations; instead, it is the franchisor's name that is held up for public scrutiny."

Brett Bartlett, an attorney with Seyfarth Shaw in Atlanta, said that most of the investigations of CKE's operations primarily involve franchisee operations and that the back wages paid across all of the investigations "are relatively immaterial, on average." The average back wage payment made to employees as a result of the CKE investigations has been around $2,000, according to the data Bartlett has seen. Legal expenses to defend against lawsuits can quickly add up to that amount—a good reason for CKE to settle disputes, he noted.

And John Gordon, principal with Pacific Management Consulting Group (chain restaurant earnings and economics experts in San Diego), said he would expect fewer wage and hour problems at CKE than its competitors since its brands are well-established and profitable.


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