Suit against Carl's Jr. parent company alleges unfair business practice to suppress wages

One current and one former Carl’s Jr. employee filed a class-action lawsuit in Los Angeles Wednesday, alleging that Carl Karcher Enterprises LLC and its franchisees colluded to suppress wages by barring management workers from transferring between restaurants.

According to the lawsuit, the Carpinteria-based company uses “no-hire” agreements in an effort to keep workers from seeking raises by threatening to go to another franchisee. CKE is the parent company of the Carl's Jr. and Hardee's fast-food franchises.

The lawsuit cites comments CKE Chief Executive Officer Andy Puzder has made about his faith in free-market capitalism to spur the economy and reduce poverty. Under Puzder, President Trump’s pick for Labor secretary, the market for CKE employees is not free, the lawsuit said.

“If I can’t threaten my employer with going elsewhere — and taking my unique skills … to another Carl’s Jr. restaurant with me — then I am unable to demand as high of a salary,” said Nina DiSalvo, an attorney for the plaintiffs. “There’s no pro-competitive justification that we can identify that would support having a restraint like this. The only reason we can identify is to actively reduce labor costs to save them money.” 

The lawsuit comes on the heels of the Senate’s Health, Education, Labor and Pensions Committee setting a date for Puzder’s confirmation hearing. After four delays, the hearing is expected to be held Feb. 16.

This isn't the first time Puzder has faced heat for his business practices.

Democrats have criticized him for labor-law violations at the company’s restaurants, as well as for his opposition to increasing the federal minimum wage to $15 an hour. Opponents received additional ammunition this week when Puzder admitted to employing a housekeeper who was an immigrant in the U.S. illegally.

“While we will not comment on the specifics of any pending litigation, the timing of the filing of this baseless lawsuit is obviously intended to be an attempt, albeit a feeble one, to derail the nomination of Andy Puzder,”  Charles A. “Chip” Seigel III, executive vice president and general counsel for CKE, wrote in a prepared statement.

“The plaintiffs and their backers will succeed at neither.”

Luis Bautista, a shift leader at a Los Angeles Carl's Jr., and Margarita Guerrero, who worked as a shift leader until late 2016, alleged that they suffered reduced wages and “atrocious” working conditions because of the company’s no-hire policy.

Guerrero said she was promised that her pay would increase during the year she worked as a shift leader. However, she was never paid more than she earned as a crew member, according to the lawsuit.

If the company itself — rather than its franchisees — directly employed management workers, the lawsuit said, then it would be entitled to restrict movement between locations. But CKE officials and Puzder have said in the past that franchisees are not part of a single entity. Instead, they are expected to compete, according to the filing.

Puzder “cannot have it both ways,” the lawsuit said. “They cannot eschew their responsibilities under labor and employment laws by embracing a free-market model constituted by independent, competing franchisees, while at the same time restraining free competition to the detriment of thousands of workers employed by CKE and its franchisees.”

Lawyers for the plaintiffs are asking for the company to abolish the no-hire policy and seeking damages for the two people named in the suit, as well as any other management-level employees who have been affected.

hannah.fry@latimes.com

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