Andy Puzder, the chief executive of the company that owns the Carl's Jr. and Hardee's chains, is one of the nation’s most effective spokesmen for the rights and privileges of fast-food franchisers. But as a spokesman for the rights of workers, especially the low-wage workers employed in his chains, he doesn’t rank.
That’s why labor advocates are appalled by Puzder’s selection by President-elect Donald Trump as secretary of Labor. For much of a history dating back to 1913, the post has been a platform for advocacy for the rank and file worker — often filled by labor leaders, labor economists, academics or civil rights crusaders.
Puzder, the chief executive of CKE Restaurant Holdings, would be only the second person to move directly into the position from a career as a corporate executive (following Ray Donovan, a construction executive who served under Ronald Reagan in the 1980s). He would take his place in a Trump Cabinet already shaping up as a hive of billionaires and business leaders. They don’t need an additional voice in the Trump Cabinet.
Puzder has been vilified for ostensibly advocating the replacement of human workers by robots and opposing an increase in the minimum wage. As we reported following a lengthy interview with Puzder in March, his views are more nuanced. But Puzder is almost certain to approach his job as Labor secretary from the standpoint of an employer of low-wage workers, not as an advocate for those employees.
“The Labor secretary serves as the chief advocate and protector of our nation’s workforce,” Christine Owens, executive director of the National Employment Law Project, observed Thursday. “But based on Mr. Puzder’s own comments, it’s hard to think of anyone less suited for the job of lifting up America’s forgotten workers — as Trump had campaigned on — than Puzder.”
There’s a lot at stake in this nomination. Under current Labor Secretary Thomas Perez, a civil rights lawyer, and his predecessor Hilda Solis, a labor advocate who is now a Los Angeles County supervisor, the agency has been deeply engaged in dealing with the dramatic changes in the American workforce. It has pushed for higher wages for low-income workers and paid-leave laws for working mothers of newborns. Perez implemented a federal regulation extending eligibility for overtime pay to as many as 4 million more workers. (The rule has been blocked by a federal judge in Texas.)
Puzder, by contrast, is a franchise executive. The industry he represents has been repeatedly accused of shedding responsibility for wages, hours, and working conditions by shifting it to franchisees, which take on the guise of small businesses even though they’re inextricably yoked to big corporations. Puzder has spoken often of the educational and health benefits offered to employees of CKE. But most of the workers at Carl’s Jr. and Hardees locations are employees of the franchisees, who own and operate 92% of CKE’s restaurants.
According to an analysis published in September by Bloomberg BNA, nearly 60% of Department of Labor investigations of CKE locations under the Federal Labor Standards Act showed at least one violation. Sadly, that meant that CKE ranked as one of the best-performing chains among the nation’s 20 largest fast-food companies (only Pizza Hut, Jack-in-the-Box and Chik-Fil-A ranked better), but that marked CKE only as one of the best of a bad lot.
The employment structure of franchise companies such as CKE has become a major target of the Department of Labor. The agency has been pressing to designate such firms as “joint employers” with their labor subcontractors of franchisees, thus ensuring that they can be held to account for violating federal labor standards. The industry and others have been pushing back vehemently against this initiative, with the International Franchise Assn., of which Puzder is a board member, leading the way. With Puzder as labor secretary, the future of this initiative looks grim indeed.
Puzder views his company as providing a steppingstone for entry-level workers toward managerial careers, whether at CKE or elsewhere. "Some move on to other jobs and challenges equipped with the experience you can only get from a paying job," he told a Senate committee last year. "There's nothing more fulfilling than seeing new and unskilled employees work their way up to managing a restaurant."
Puzder drew fire earlier this year for an interview with Business Insider in which he sang the praises of restaurant automation — machines are “always polite, they always upsell, they never take a vacation, they never show up late, there's never a slip-and-fall, or an age, sex, or race discrimination case."
His point, he told me in March, was that government mandates impose costs that "make automation a more viable option for business." But "we could never take out all the front-line employees" at CKE restaurants. At Carl's Jr. and Hardee's "you have to have people behind the counter because [customers] are used to that and people are more comfortable with it." He might consider, however, equipping restaurants near college campuses or other youth-oriented neighborhoods with touchscreens, because he believes that millennials are more comfortable with automated ordering.
But he thinks more automation is the wave of the future. "You can't stop the process," he said; it's the cost of those mandates that are forcing it to happen too fast.
On the minimum wage, Puzder said he was not opposed to any increase, or even indexing the minimum to inflation. But he said that a jump to $15, even over a few years, inevitably would cost many low-wage workers their jobs. That blanket conclusion has been widely questioned, as companies that have taken the initiative to raise their minimum wages have found that it yields improvements in productivity and other gains.
Those companies, however, are "not talking about $15 or $12 an hour, the kind of dramatic increases that are being bandied about in the political process right now," Puzder said. CKE's average wage, he said, is a bit over $10 an hour, "so we're not talking about everybody in the restaurant working for $7.25. But we're talking about entry-level jobs. Are people going to want to hire entry-level employees for these very high minimums, which come with Obamacare, which come with mandatory sick leave, or other benefits which the government imposes on business for these individuals? Are you going to be able to keep minimum-wage entry-level job positions open for individuals?"
He added, "I started out scooping ice cream at Baskin-Robbins at a dollar an hour," he said. "I learned a lot about inventory and customer service ... but there's no way in the world that scooping ice cream is worth $15 an hour, and no one ever intended it would ever be something that a person could support a family on. ... Those jobs just don't produce that kind of value like a construction job or a manufacturing job does." (He probably was scooping ice cream in the mid- to late 1960s, when $1 was worth what about $7.50 would be today.)
The Affordable Care Act has been one of the most frequent topics of Puzder's writings in the Wall Street Journal. CKE long has offered ACA-compliant health plans to managers or those who worked 30 hours a week or more, and "mini-med" plans to others. Puzder has maintained that the enrollment rate in those plans is very low, which he interprets as a sign that the vast majority of young people don't want the coverage and would rather pay the individual penalty than pay for insurance.
The difference is narrowing, though — the penalty was $325 per person last year, but $695 this year. And many CKE employees may not be taking up company coverage because it's cheaper to buy on the ACA exchanges, especially for people eligible for tax subsidies.
Puzder's brief against Obamacare is familiar in conservative circles: Costs and deductibles are rising, insurers are having trouble making money in the individual market. He maintains that the program is giving small employers an incentive to lay off workers to avoid the insurance mandate, and that includes CKE franchisees. "The government is traditionally not very good at managing these types of programs," he told me. "The incentives of Obamacare are not set up in a way that makes economic sense. Obamacare is surviving based on increased government funding and increased taxpayer funding."
Puzder has earned kudos for turning around a troubled CKE after he linked up with its founder, Carl Karcher, in 1991 and becoming CEO in 2000. But his role at CKE will bequeath him a hopeless conflict of interest as secretary of Labor. One could think of a dozen high-level Trump administration posts that Puzder could fill effectively. Secretary of Labor isn’t on the list.