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Papa John’s Franchisee to Pay $2M to New York Delivery Workers

New York – Attorney General Eric T. Schneiderman announced yesterday that his office has obtained a judgment for over $2 million against a Papa John's franchisee for underpaying hundreds of delivery workers at five Harlem restaurants.

Schneiderman said this is the second judgment in the last two months that they have received against Papa John's franchisees. The first was announced on February 2 in the amount of $800,000 for underpaying restaurant workers.

The AG emphatically vowed to continue to investigate wage and hour violations in the fast food industry. "More broadly, franchisors need to step up to the plate. I call on all fast food franchisors, including Papa John's, to take steps necessary to ensure that their workers—the backbone of their business—are treated fairly and paid the wages the law requires."

The attorney general understands that until now there has been a separation between franchisor and franchisee employees but worded his statement to emphasize "their workers" as showing that the franchisor has responsibility too in ensuring that the employees of franchisees met legal wage requirements.

In today's judgment, New Majority Holdings and franchisee owner/operator Ronald Johnson were held liable for violating New York Labor law. It cites that the franchise company for "rounding down workers' hours" to the nearest whole hour increment, failing to pay legally-required overtime, and paying delivery workers lower, "tipped" minimum wage, even though they were assigned to a substantial amount of untipped kitchen and other work. They were also cited for failing to reimburse employees for costs of purchasing and maintaining bicycles used to make deliveries.

New York Congressman Charles Rangel put in his two cents worth, but doesn't seem to understand the difference between franchisee-owned and company-owned restaurants. He declared, "It's a shame that such a profitable company like Papa John's would undercut its workers' pay." Rangel said this is not only grossly unlawful but also downright disrespectful to the people who are working so hard to serve its customers. "I applaud the Attorney General for holding the company accountable and join him and my colleagues in demanding fair wages for the workers who deserve fair play and pay," he continued.

New York City Council Speaker Melissa Mark-Viverito chimed in stating, "Wage theft is a pervasive problem in New York City and I commend Attorney General Schneiderman for his hard work bringing justice for these workers." She said no worker should worry about their wages, and she committed to working with Schneiderman "as we seek to hold bad actors accountable."

AG going after franchisees

The two judgments obtained by the AG's office clearly point to liability of the franchisees, not to Papa John's corporate. Although, CEO John Schnatter has not come forth with comments, last summer he was interviewed by Inc. magazine regarding the matter. Referring to his company-owned restaurants, he said, "I don't pay anybody minimum wage. The average driver makes closer to $20 an hour than $10 an hour. Regardless of what the minimum wage is you really have the mark of wage. And if we aren't taking care of our people, we're going to lose good talent at every level." He added that he even has a goal to get the average store manager to $75,000.

A Papa John's company spokesperson then quickly added that the restaurants being probed are all franchised rather than corporate-owned, and "we can't and don't dictate what franchisees do and how they run their businesses."

The press has also picked up on CEO Schnatter's wealth in recent years. In a USAToday article in 2013, the Papa John's owner made no apologies for his wealth in Louisville, Kentucky. The residence is 24,000 sq. ft. on 15 acres, complete with a golf course and swimming pool. It is valued at $7.5 million. And the article states that the home is one of three residences he and his wife own. Schnatter quips, "When you have built a $3 billion company out of a broom closet, I think you are entitled to a nice house."

Franchisor concern

But franchisors are becoming more concerned as worldwide protests by fast food workers continue, grabbing the attention of the media and other government agencies.

The National Labor Relations Board last December filed 13 cases against McDonald's Corp. and its franchisees, alleging they violated the rights of restaurant employees. NLRB asserted that both had taken action against low wage workers for engaging in the union-organized protests. Then earlier this year, ten restaurant workers in Virginia filed a civil rights lawsuit against McDonald's and a franchisee for racial discrimination, alleging they were fired "because they were too black."

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