Article from Consumer Affairs

Article from Consumer Affairs

Carl's Jr. parent company accused of wage suppression and unfair business practices The lawsuit could mean trouble for CEO Andy Puzder, who awaits confirmation to become Labor Secretary

By: Christopher Maynard of Consumer Affairs 

One former employee and one current employee of Carl’s Jr. have filed a lawsuit against the chain’s parent company Carl Karcher Enterprises LLC (CKE), charging the company of wage suppression and unfair business practices, according to the Los Angeles Times.

The pair claims that CKE and its franchisees colluded with each other to bar employees in management positions from transferring between restaurants. This action, they say, effectively halts any attempt by workers who are seeking a raise from threatening to work at a different franchisee.


"If I can’t threaten my employer with going elsewhere – and taking my unique skills... to another Carl’s Jr. restaurant with me – then I am unable to demand as high of a salary. There’s no pro-competitive justification that we can identify that would support having a restraint like this. The only reason we can identify is to actively reduce labor costs to save them money," said plaintiff attorney Nina DiSalvo.

Bad news for Puzder.

While the lawsuit itself is problematic for CKE and Carl’s Jr., its ramifications could be even worse for CEO Andy Puzder. Puzder, who has long touted the virtues of free-market capitalism, has been nominated by President Trump to be Labor Secretary.

Unfortunately for Puzder, this is not the first time that he has faced criticism for his business practices. Democrats have highlighted the CEO’s opposition to raising the minimum wage to $15 per hour, and past allegations claim that CKE’s restaurants violate labor laws.

Luis Bautista and Margarita Guerrero, the plaintiffs of the current suit, lend credence to these criticisms. They allege that they suffered reduced wages and had to work in "atrocious" conditions because of their franchisee’s no-hire policy. They say that CKE’s policies set up franchisees to compete with each other, but then restrict movement of workers between locations.

"CKE and Puzder cannot have it both ways. They cannot eschew their responsibilities under labor and employment laws by embracing a free-market model constituted by independent, competing franchisees, while at the same time restraining free competition to the detriment of thousands of workers employed by CKE and its franchisees," the lawsuit states.

"Feeble and baseless"

Puzder’s legal defense has stated that the new lawsuit is nothing more than an intentionally ill-timed shot that is meant to stir up ill will before the CEO’s senate confirmation hearing.

"While we will not comment on the specifics of any pending litigation, the timing of the filing of this baseless lawsuit is obviously intended to be an attempt, albeit a feeble one, to derail the nomination of Andy Puzder," said CKE executive vice president and general counsel Charles A. Siegel III.

Puzder’s confirmation hearing has been delayed on four separate occasions, but it is currently scheduled to take place on February 16.

For more information, visit the Consumer Affairs website