Los Angeles, CA (Law Firm Newswire) April 28, 2017 - According to a class-action lawsuit filed in a California superior court, President Trump’s first pick for secretary of labor Andy Puzder allegedly ran an illegal wage-fixing scheme in his fast-food chain, Carl Karcher Enterprises (CKE).
While Puzder, CEO of CKE, has called his Carl’s Jr. restaurants “independent businesses,” one former and one current shift leader allege that they are franchises, and that CKE and its franchises have colluded with one another under “no hire” agreements to suppress wages and prevent managers from moving between restaurants.
The lawsuit further aims to demonstrate that CKE, which owns Carl’s Jr., Green Burrito, Red Burrito, and Hardee’s, prevents its workers from thriving in the free market. Due to restrictions stated in a preliminary franchising agreement, CKE franchise workers are unable to threaten to leave their jobs for another CKE restaurant job that pays a higher wage. A specialized system at CKE restaurants encourages internal promotions, which lessens managers’ bargaining power.
In testimony given before Congress, Puzder stated that the CKE franchisees make independent employment and management decisions. While CKE CEO Puzder has publicly stated that his chains embrace the free market, the lawsuit alleges that the no hire agreement worsens working conditions and prevents franchises from hiring freely in the market.
The lawsuit states, “[Puzder and CKE] cannot eschew responsibilities under labor and employment laws by embracing a ‘free market’ model of independent franchisees, while restraining free competition to the detriment of thousands of workers.”
While the lawsuit was filed in the California courts, federal statutes also apply to the case. The federal Sherman Antitrust Act prohibits rival companies within the same sector to collude to fix wages. Individuals charged for violation of this federal law for illegal restraint of trade could face a $1 million fine and up to 10 years in federal prison.
The class-action lawsuit claims that the no hire policy suppresses working conditions and keeps wages down in order for CKE to make more money. The suit aims to end the no hire agreement and seeks restitution and damages for former and current CKE restaurant managers.
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