How McDonald's gets away with rampant wage theft

Chains are stealing hundreds of thousands of dollars from their workers -- and our legal system is protecting them

Published April 6, 2014 3:00PM (EDT)

  (Reuters/Lucy Nicholson)
(Reuters/Lucy Nicholson)

This originally appeared on Next New Deal.

Next New Deal Despite the extensive press coverage of the fight of fast-food workers for a $15 hourly wage, one recent development hasn’t gotten much attention: fast food workers around the country have started to win significant wage theft lawsuits against McDonald’s franchisees, to the tune of hundreds of thousands of dollars. These lawsuits raise an important question: How has McDonald’s been able to get away with stealing hundreds of thousands of dollars from low-wage workers? The answer is straightforward. Our system for enforcement has been so severely weakened that many employers are able to regularly violate workers’ basic rights. And the law itself is broken. Its structure allows corporations like McDonald’s to escape responsibility for the conditions in their workplaces.

In February, student guest workers won a lawsuit that charged a McDonald’s franchise in Pennsylvania with wage theft. They had been paid sub-minimum wages, denied overtime pay and charged exorbitant prices for company housing. The Department of Labor required the franchise to pay $205,977 to both guest workers and native-born workers at the franchise. This victory was rapidly followed by a wave of other lawsuits around the country.

Last week, McDonald’s workers in three cities launched highly publicized cases charging the corporation with wage theft. These workers had experienced many types of wage theft. The workers in California claim that they were not paid for overtime work. In Michigan, workers are asserting that they were required to show up for work but were not allowed to clock in. Workers in New York allege that were not compensated for the time they spent cleaning their uniforms, required to do work off the clock and not paid overtime. The New York suit was almost immediately successful. Last week, seven franchises agreed to settle for almost $500,000.

McDonald’s workers are not alone. Wage theft has become a widespread problem in low-wage industries in the United States. An influential study found that more than two-thirds (68 percent) of workers had experienced some form of wage theft in their previous week of work: they were paid below the minimum wage, not paid for overtime, required to work off the clock or had their breaks limited. An organization of fast food workers in New York City surveyed workers and found that 84% of workers had experienced wage theft in the last year.

Addressing wage theft will take a two-pronged solution: rebuilding the enforcement system in the U.S., and cutting through the smokescreen of subcontracting and franchising to hold employers responsible for the wages and working conditions in their workplaces.

The enforcement regime in the United States has been significantly weakened over the last several decades. There has been an overall downward trend in funding for the Department of Labor. The number of labor inspectors had plummeted for years. The Obama administration has added new inspectors, but not enough to make up for the long-term decline. Meanwhile, the number of workers who need protection has grown. This pattern has to be turned on its head. If rampant wage theft is to be stopped, we need to radically increase the number of labor inspectors on the ground.

But – as Annette Bernhard points out in a new paper – increased funding is not enough. The enforcement system that we have is not well structured to deal with our current economy. It must be transformed. The penalties for employers who violate workplace regulations must increase. Enforcement agencies should partner with organizations like unions and worker centers that are in daily contact with workers. These organizations can educate workers and employers about workplace regulations, and they can provide an ear to the ground to help identify violators.

Even a radical transformation of the enforcement regime will not be enough in today’s economy. We need to change the law to deal with changes in the structure of employment. Right now, McDonald’s is structured so that the franchise owners are technically considered to be the employers. They are held legally responsible for wage violations in their stores, leaving McDonalds itself off the hook. Both recent legal victories charged franchise owners rather than the McDonald’s corporation itself. McDonald’s is shielded from blame while it continues to reap the majority of the profits that come from mistreating workers.

We need a new definition of what it means to be an employer. The current definition makes it impossible for workers to hold their corporate employers – the ones who are setting the real terms of their work – responsible. The two remaining McDonald’s wage theft cases target both the franchise owners and the McDonald’s corporation itself. That challenges the narrow definition of employer, which limits responsibility to the franchise owner. The time has come for the law to be changed. All employers - from the front-line employers up to top of the employment chain – should be legally recognized as such so they can be held accountable for the conditions in their workplaces.

Wage theft that has become an endemic problem in today’s economy. Low-wage workers should not have to turn – again and again – to private lawsuits as a solution. They deserve the basic right to be paid for their labor. To get there, we need full funding and comprehensive reform of the enforcement system in the United States, and we need legal reforms that hold central employers responsible for the conditions in their workplaces.

By Harmony Goldberg

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Mcdonalds Mcdonald's Strike Minimum Wage Next New Deal Wage Theft