Is Fast-food Business Model Based on Wage Theft?

by Gregory N. Heires

McDonaldsThe fast-food business model is based on wage theft.

That’s the thrust of seven lawsuits that hit McDonald’s in three states last week.

Employees are cheated out of overtime.

They are forced to clock out when a computer monitoring program determines that profits are at risk because not enough customers showing up.

And the exploited workers’ pay falls below the minimum wage because they are forced to pick up the tab for cleaning their uniforms.

The lawsuits seek class-action status, which means thousands of workers could be covered.

An Escalation of the Fast-Food Workers’ Campaign

Filed in New York, Michigan and California, the legal suits mark a new stage in the campaign of fast-food workers to boost their salary to $15 an hour and win the right to unionize without retaliation.

They launched their mobilization with a one-day strike in New York City in November 2012. That was followed by nationwide work stoppages in 100 cities this past December.

The lawsuits strike at the heart of the business model of McDonald’s and the fast-food industry. McDonald’s maintains that it is not liable for workplace abuses because its franchises are independent businesses and the direct employers of the workers. But the lawsuits contend that McDonald’s is a joint employer and shares the liability of franchises for illegal employment practices. About 90 percent of McDonald’s restaurants are franchises.

“We’ve uncovered several unlawful schemes, but they all share a common purpose—to drive labor costs down by stealing wages from McDonald’s workers,” said Michael Rubin, an attorney who represents California workers, where four lawsuits were filed. Attorneys, organizers and workers announced the lawsuits during a conference call and news releases on March 13.

“Our wages are already at rock bottom,” said Sharnell Grandberry, a McDonald’s workers in Detroit, in a news release on the two Michigan lawsuits quoted by The New York Times. “It is time for McDonald’s stop skirting the law to pad profits. We need to get paid for the hours we work.”

The lawsuits describe employer schemes to underpay their workers:

• In New York, workers allege that they are not reimbursed for the cost of washing their uniforms, as required by law. Because they are paid at such a low hourly rate, the loss is enough to drive down their actual pay below the minimum wage, which violates federal labor law.

“With $28 billion in revenue in 2013 alone, McDonald’s can certainly afford to provide its minimum-wage workers with this money to clean their uniforms, as required by law, instead of making them pay for the privilege of wearing McDonald’s advertising,” Jim Rief, the attorney who represents the New York workers, said in a statement.

The Rip-off Schemes

• In California, workers report that restaurants have a computer system provided by McDonald’s that allows managers to monitor a “labor number” that shows how much a store is spending on workers compared with how much money is coming in from customers. When the labor number gets too high, employers temporarily pull workers off the job.

Besides getting ripped off because of the computer system, California workers allege that they are cheated out of pay because they don’t receive proper overtime compensation and employers alter pay records.

• In Michigan, workers are told to report to work at a certain time. But they then may remain idle—and unpaid—if not enough customers show up.

The claims in the lawsuits are violations of the federal Fair Labor Standards Act. The act establishes the minimum wage and it determines the standards for overtime pay, record keeping and other employment practices.

A McDonald’s spokesperson said the company would investigate the allegations.

Poverty Wages

Fast-food workers are typically paid $9 an hour, which amounts to $18,500 a year, according to CNN. That is $4,500 below what the U.S. Census Bureau’s considers the poverty income threshold for a family of four–$23,000.

The University of California, Berkeley, Labor Center and the University of Illinois released a report in October that found that half of the families of fast-food workers rely on public assistance at an annual cost of $7 billion to taxpayers. In 2012, seven publicly owned fast-food companies earned $7.4 billion in profits, according to a report by the University of California at Berkeley’s Labor Center and the University of Illinois. That year, McDonald’s awarded their top executives $53 million in salaries and distributed $7.7 billion to shareholders, according to another report by the National Employment Law Project.

Gregory N. Heires is senior associate editor at Public Employee Press, the official publication of District Council 37, which represents 120,000 municipal workers and 50,000 retirees in New York City.  He blogs at The New Crossroads.

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