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CKE Restaurants Class Action Signifies Shift in Administrations

According to economic theory, monopolies stifle competition by disrupting the balance between supply and demand, which creates an unfair advantage for suppliers who raise prices for consumers. Recently this theory has been applied to the labor market. When monopolies limit the amount of choices in the job market, employees have little bargaining power in their wage or income. Antitrust laws are intended to protect the economy from monopolies.

Managers at the fast food chain Carl's Jr, owned by CKE Restaurants Group ("CKE" or the "Company"), used this labor market theory to file an antitrust class action in California for allegedly suppressing wages by preventing franchisees from hiring each other's workers.

The lawsuit claims the Company bars franchisees from employing supervisors who work at other CKE franchises, or worked at one in the past two years. Franchisees are encouraged to compete with each other in some ways, such as through choices in franchise location, investments in facilities and equipment, and setting prices, but are restricted from competing for labor. With shift leaders earning $25,000 and general managers earning between $35,000 and $40,000, workers allege this business practice keeps wages low and inhibits their mobility.

In 2015, the Department of Labor issued a rule changing the overtime exemptions for certain employees. The rule expanded the number of employees that are eligible for overtime under the Fair Labor Standards Act by, in part, raising the annual income threshold to $47,476. In other words, workers making less than $47,476 per year would be entitled to overtime for hours worked in excess of 40 per week. Although President Donald Trump has not made his indication clear on what he plans to do with the rule, his Secretary of Labor nominee, Andy Puzder, has strongly opposed it. It is worth noting that nominee Puzder was, before being nominated, CEO of CKE. This class action may provide a preview to the shifting policies between the Obama and Trump administrations as the workers in the case are exactly the type the new rule was intended to cover.

The legal team at SFMS has substantial experience litigating employment matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier ([email protected]) or Chiharu Sekino ([email protected]). We can also be reached toll-free at (866) 540-5505.

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Campbell, Braden. "CKE Restaurants Hit With Antitrust Class Action." Law360. Last modified February 8, 2017.

Elliot, Justin. "How Trump Could Kill a Plan to Get you Overtime Pay," ProPublica. Last modified January 13, 2017.

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