Business & Economy

LA fines Carl's Jr. $1.45M for alleged wage theft

Carl's Jr
Carl's Jr
Keenan Pepper/Flickr Creative Commons

The city of Los Angeles is ordering Carl’s Jr. to pay $1.45 million in restitution and penalties for allegedly failing to pay three dozen of the fast-food chain's workers the city’s minimum wage during the second half of last year.

"There is no evidence to suggest that these employees did not do what they were asked to do," said John Reamer, inspector of public works, who oversaw the investigation. "Yet there is plenty of evidence to suggest that they were not paid accordingly."

Carl's Jr. neglected to pay 37 employees the required city minimum wage of $10.50 per hour from July 1 through Dec. 31, 2016, according to L.A.'s Office of Wage Standards. City Attorney Mike Feuer said the workers were owed a total of about $5,000.

The city is demanding that Carl's Jr. pay the workers approximately $900,000 in penalties, and another $500,000 in fines to the city.  The fines, which are outlined in the city’s minimum wage ordinance, accrue daily.

"Every day a minimum wage worker isn’t getting paid, that worker has to make crucial decisions between paying rent, paying for the food that they need, paying for medication for their kids," said Feuer.

In a statement, Carl's Jr's parent company CKE Restaurants said the shortfall was due to "an inadvertent payroll error." The company said it had already repaid the employees’ lost wages, totaling approximately $5,400, and that the city’s punishment is unconstitutional under the excessive fines clause of the 8th Amendment.

"Our employees have been made whole and we are willing to pay a reasonable fine for our mistake," the statement said. "However, given the excessive demands of the [Office of Wage Standards], we have no choice but to defend against any [Office of Wage Standards] actions."

Feuer said the company's response "leaves me cold." He defended the size of the penalties, calling them "meaningful" and based on "objective criteria."

The Office of Wage Standards said it started the investigation after receiving a tip from a Carl’s Jr. employee. The alleged violations affected workers at seven of the chain's 13 L.A. locations, and affected about 7 percent of its workforce in the city, Feuer said.

The company was also fined for failing to post required notices documenting the minimum wage and for allegedly preventing representatives from the Office of Wage Standards on two separate occasions from accessing its employees.

The company has 30 days to respond to the complaint and an additional 15 days to appeal.