Articles Posted in Wage and Hour Disputes

A court has fined a pizza restaurant franchise in Australia, and its owner, a total of $334,000 in Australian dollars (AUD), which is approximately $310,653 in the United States (USD), after finding that the restaurant had underpaid its employees hundreds of thousands of dollars. This amount is in addition to unpaid wages, for a total judgment of about $600,000 AUD. The mostly-teenage workforce received free or discounted pizza, sometimes instead of actual pay. The Fair Work Commission (FWC) brought claims against the franchise owner for violations of the country’s wage and hour laws, resulting in the rulings from the Federal Circuit Court of Australia. Fair Work Ombudsman v. Bound for Glory Enterprises, et al, [2014] FCCA 432 (Jun. 6, 2014); Fair Work Ombudsman v. Zillion Zenith Int’l Pty Ltd, et al, [2014] FCCA 433 (Jun. 6, 2014).

The franchise owner, Ruby Chand, operates two La Porchetta franchises in Melbourne, in the state of Victoria, Australia. He operates the restaurants through two companies, Bound for Glory Enterprises (BFG) and Zillion Zenith International (ZZI). At least one employee filed a complaint about underpayment of wages. This resulted in an investigation by the FWC, which performs roles in the Australian federal government similar to those of the U.S. Department of Labor’s Wage and Hour Division, the Equal Employment Opportunity Commission, and the National Labor Relations Board.

The FWC’s investigation reportedly found that Chand and the two companies had underpaid 111 employees during a period from July 2009 to February 2012. Employees would often get free or “half-priced” food and beverages in exchange for a lower hourly rate, a finding that Chand apparently did not dispute. During this time, the FWC also found that Chand claimed government subsidies of about $45,000 AUD, ostensibly for hiring new employees.
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A group of workers in several warehouses owned by Walmart recently settled a lawsuit against the company that operates the warehouses under a contract with the retailer. The settlement includes $21 million in back pay, interest, and penalties, and that amount will reportedly be the sole responsibility of the contractor. The plaintiffs initially sued the contractor and several affiliated companies for alleged violations of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., and California labor statutes. The court granted their motion to amend their complaint to include Walmart itself under the theory that the contractors and it were joint employers of the plaintiffs. Carrillo, et al v. Schneider Logistics, Inc., et al, No. 2:11-cv-08557, third am. complaint (C.D. Cal., Jan. 11, 2013).

The plaintiffs worked in warehouses owned by Walmart in Eastvale, California at various times between approximately January 2003 and February 2012, according to their most recent complaint. Schneider Logistics, Inc. and several other businesses had contracts with Walmart to provide warehousing, trucking, and other services at the warehouses. The plaintiffs were employees of one or more of the contractors, in the sense that they received paychecks and other features of employment from one or more of those companies.

The allegations against the defendants included dangerous working conditions, minimum wage violations, and failure to pay overtime. The plaintiffs further alleged that the defendants failed to keep accurate payroll records, and even falsified records, in an effort to conceal wage violations and unlawfully withhold earnings from workers. In October 2011, the initial group of plaintiffs filed the lawsuit on behalf of themselves and more than 200 other workers who consented to suit under the FLSA. 29 U.S.C. § 216(b).
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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.
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A factory worker’s lawsuit alleges that her employer violated state labor laws by failing to allow her adequate restroom breaks, then firing her for improvising her own solution. A U.S. district court denied the defendant’s motion to dismiss in Prince v. Electrolux Home Products, Inc., No. 13-cv-02316, mem. op. (D. Minn., Feb. 14, 2014), finding that the plaintiff had met the pleading requirements for wrongful termination or retaliation. The plaintiff in this case can take advantage of a state law requiring reasonable restroom breaks. The federal Fair Labor Standards Act (FLSA) does not expressly require employers to allow restroom breaks, although the Occupational Safety and Health Administration (OSHA), has interpreted its regulations to mean that employers may not unreasonably deny access to restroom facilities.

The plaintiff was an assembly-line worker at a plant in St. Cloud, Minnesota. She suffers from a medical condition that causes her to need to use the restroom frequently. She alleges that she asked her supervisor for permission to take a restroom break several times over the course of thirty to forty minutes, but was repeatedly ignored or denied. Eventually, the 51 year-old plaintiff was no longer able to wait, so she lined an empty box with a plastic bag, concealed herself as best she could near her workstation, and urinated in the box. The following day, she was terminated for violating a company health and safety policy.

The supervisor allegedly refused permission for restroom breaks on a regular basis, and the plaintiff claims that he had instructed her to use a box or a bucket in the past. The plaintiff was out of work for about nine months until an arbitrator reversed her termination in April 2013, finding that it violated the union collective bargaining agreement. Even though she got her job back, the plaintiff filed suit against her employer in federal court in August 2013, asserting causes of action for violations of the Minnesota Occupational Safety Act (MOSHA) and a state statute requiring adequate restroom breaks for employees.
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Workers and state regulators have filed multiple lawsuits against McDonald’s, the national fast-food chain, and its franchisees for alleged violations of state and federal wage and hour laws. The company has faced widespread protests from employees, who allege that they have been denied overtime pay. A federal lawsuit filed in mid-March 2014 in New York claims that the company regularly failed to pay employees for time they were required to be at work, failed to pay overtime as required by law, and did not reimburse employees for certain work-related expenses. The New York Attorney General’s office announced around the same time that it has settled a claim against a McDonald’s franchisee regarding violations of state wage and hour laws.

Six McDonald’s employees filed a putative class action lawsuit against McDonald’s for violations of the federal Fair Labor Standards Act (FLSA) and New York laws regulating minimum wage and the cost of maintaining work uniforms. Beard, et al v. McDonald’s Corp., et al, No. 1:14-cv-01664, complaint (E.D.N.Y., Mar. 13, 2014). McDonald’s has annual gross revenues of more than $27 billion, according to the complaint, and it directly operates thirty-four restaurants in New York out of more than 33,000 around the world. The plaintiffs work at McDonald’s restaurants in the Queens, New York area. Their job duties include working the cash registers and drive-through windows, food preparation, restocking, and cleaning.

The plaintiffs state that they are paid a “nominal hourly rate only at or slightly above the minimum wage.” Id. at 2. The company requires them to maintain their own work uniforms, but does not reimburse them for maintenance expenses. It also does not pay them for time spent on uniform maintenance. Because of this additional, uncompensated work time, the plaintiffs claim that their wages are below the minimum set by the FLSA and state law. The lawsuit claims violations of the New York Hospitality Industry Wage Order, 12 N.Y.C.R.R. Part 146, which requires employers to reimburse employees for certain expenses related to uniform maintenance, as well as minimum wage violations under FLSA and state law.
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A federal court has ordered a restaurant company to pay a group of employees liquidated damages under the Fair Labor Standards Act (FLSA). In Dobson, et al, v. Timeless Restaurants, Inc. d/b/a Denny’s, a number of diner servers sued their employer for failure to pay unpaid minimum wages and overtime. According to the restaurants workers, they were required to participate in a tip pool that redistributed a portion of their earnings to other employees whose wages were not tip-based.

After a jury found Timeless Restaurants violated the FLSA, the court considered whether to award the workers liquidated damages. The employees argued that such an award was merited under the FLSA because the jury determined that Timeless acted willfully when it failed to pay wait staff minimum and overtime wages. Timeless, on the other hand argued that the jury’s determination was not determinative and the company “had reasonable grounds to believe that its acts or omissions did not violate the FLSA.”

According to the court, liquidated damages are not required under the FLSA if an employer who failed to pay a worker the appropriate wages acted in good faith. Still, the statute places the burden for demonstrating such a good faith belief on the employer. According to the district court, Fifth Circuit precedent states that an employer may not demonstrate it acted in good faith after a jury has determined the employer willfully violated the FLSA. As a result, Timeless was ordered to pay liquidated damages for its willful FLSA violations.
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