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Papa John’s Franchisee Faces Jail Time Over Stealing Workers’ Wages

Friday, July 17th, 2015

Bryce CovertOn Wednesday, the owner of nine Papa John’s franchises in New York City pled guilty to the first criminal case brought by New York Attorney General Eric Schneiderman against a fast food franchisee over wage theft.

According to court documents, including company records obtained by the attorney general’s office, Abdul Jamil Khokhar, the franchisee, and BMY Foods Inc. paid its 300 current and former workers the same base rate for any hours they worked after putting in 40 a week, which under law should be paid time-and-a-half. To get away with paying less, they allegedly paid overtime hours in cash and created fake names for the employees in the timekeeping system. They then filed fraudulent tax returns that left out the cash payments made to employees under the false names.

Khokhar’s sentencing is set for September 21, when he faces 60 days in jail. He also faces paying the employees $230,000 in back wages as well as an additional $230,000 in damages and $50,000 in civil penalties.

BMY Foods Inc. declined to comment. A Papa John’s spokesperson said in an emailed statement, “Papa John’s is aware of the recent incident involving one of our New York franchisees who was taken into custody this morning. These allegations do not reflect our position as a company. We have a strong track record of compliance with the law. We do not condone the actions of any franchisee that violates the law. This particular franchisee has divested itself of most of its restaurants and is in the process of exiting the system. We will continue to monitor the situation closely and take appropriate action.”

Jail time is unusual for people who perpetuate wage theft, but Schneiderman may not be done. “My office will not hesitate to criminally prosecute any employer who underpays workers and then tries to cover it up by creating fake names and filing fraudulent tax returns,” he said in a press release. “We will continue to be relentless in pursuing the widespread labor law violations, large and small, which we have found in the fast food industry.”

This isn’t the first time Schneiderman has gone after Papa John’s franchisees. In October of last year, he sued some in New York for allegedly stealing wages from more than 400 delivery drivers, seeking more than $2 million in backpay, damages, and interest. Then in February he won a nearly $800,000 judgement against another who allegedly ripped off employees.

He’s also focused on wage theft prosecutions in the New York fast food industry generally. In March of last year, he won a $448,000 payout from 23 Domino’s Pizza franchise owners and a nearly $500,000 one from a McDonald’s franchisee.

Wage theft, where workers aren’t paid minimum wage and/or overtime, are made to work off the clock, or are made to buy uniforms or equipment out of their own paychecks, is particularly rampant in the fast food industry. One poll found that about 90 percent of these workers have experienced at least one form of theft. But it’s also not limited to fast food. In 2012, at least $933 million was won in backpay by the Department of Labor, state labor departments, state attorneys general, and research firms. That sum dwarfs the less than $350 million taken in all robberies that year. Even that understates the extent of the problem, however, since many employees don’t file formal charges; it’s estimated that the country’s employers steal more than $50 billion from their employees every year.

Some places have taken steps to go beyond federal wage and hour laws to try to crack down on wage theft. On Wednesday, Jersey City, New Jersey unanimously adopted a law that would revoke city licenses from any company that doesn’t reimburse workers for lost wages, a step that has been taken in other places across the country. Other cities have upped the penalties for wage theft and enhanced enforcement measures.

This blog was originally posted on Think Progress on July 16, 2015. Reprinted with permission.

About the Author: The author’s name is Bryce Covert. Bryce Covert is the Economic Policy Editor for ThinkProgress. She was previously editor of the Roosevelt Institute’s Next New Deal blog and a senior communications officer. She is also a contributor for The Nation and was previously a contributor for ForbesWoman. Her writing has appeared on The New York Times, The New York Daily News, The Nation, The Atlantic, The American Prospect, and others. She is also a board member of WAM!NYC, the New York Chapter of Women, Action & the Media.

Mad at Obama, Papa John’s Will Cut Hours To Rob Employees of Healthcare

Monday, November 26th, 2012

Papa John’s CEO John Schnatter is angry about Obamacare, and he’s taking it out on his employees. The healthcare reform law mandates that, by 2014, employees who work more than 30 hours per week at companies with more than 50 workers must be covered by their employer’s health insurance plan. In light of Obama’s re-election, the pizza magnate announced that he will cut workers’ hours in order to create a part-time workforce and dodge the cost of providing healthcare coverage.

Papa John’s is the third-largest pizza chain in the nation with about 16,500 employees, but the company currently only provides healthcare coverage to one third of its workers. Schnatter claims he wishes all of his employees could be on the company’s healthcare plan, but that rising health insurance costs are prohibitive. He tells ABC Action News, “The good news is 100 percent of the population is going to have health insurance. We’re all going to pay for it.”

Schnatter, who was a supporter of Mitt Romney and helped raise funds for the Republican presidential candidate, started voicing his opposition to the Affordable Care Act in the months leading up to the election. In August, he complained that the reform would cost his company 11-14 cents per pizza or 15-20 cents per order (though Forbes calculates the actual cost would be 3.4-4.6 cents per pizza) and that Papa John’s would pass those costs onto customers by raising pizza prices.

To many, raising pizza prices seems like a more reasonable approach to offsetting some of the costs of healthcare reform than cutting employees’ hours. The public response has been largely, “I’d pay an extra 14 cents per pizza for your employees to have healthcare.” Many have proposed boycotting the company, such as Reddit user goforReaper:

I haven’t had a Papa John’s pizza in months since he first claimed that Obamacare would cause him to raise prices—and I assure you, all of my cheap pizza needs have been fulfilled by other, equally shitty establishments. Reddit, let’s send him a message and stop buying his pizza. His employees deserve decent wages and access to healthcare, and if he doesn’t think so, he can sit with the rest of the Romney camp and circle jerk about how tough their lives are!

It seems Papa John’s is likely to lose more money from the negative public response than from the healthcare reform—Forbes reports that that the company’s shares have dropped 4.2% between Thursday and Monday. But such boycotting risks further harming these workers it aims to defend, as Mediaite points out:

The problem with boycotting Papa John’s (aside from the fact that it’s hard to refuse to buy pizza from a chain you already don’t buy pizza from) is that it actually hurts the employees on whose behalf we’re all outraged. A far better solution would be to send a check for $0.14 to John Schnatter every time you buy a pizza. Concerned citizens could also organize a Tipcott™, wherein they order the cheapest thing on the Papa John’s menu, then give the driver, like, a 100% tip.

On the other end of the spectrum, some have declared strong support for Papa John’s and are trying to use the issue to spark a movement in opposition of the healthcare reform law. In fact, @Reboot_USA started a Facebook campaign declaring Nov. 16 National Papa John’s Appreciation Day, on which Papa John’s supporters visit their local Papa John’s and order a pizza to stand against the “fiscal nightmare” that is Obamacare.

This article was originally posted on Working in These Times on November 16, 2012. Reprinted with Permission.

About the Author: Sarah Cobarrubias is a freelance writer and editor at Chicagoista. She lives in Pilsen, IL.

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