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Unhappy Meal

The Fast Food Industry Runs on Wage Theft

The franchise model makes hurting workers inevitable.

An employee of McDonald's protests outside a branch restaurant for a raise in their minimum wage to $15 an hour, in Fort Lauderdale, Florida, on May 19, 2021.

Let us now praise fast food workers.

At a time when the media paints heroic depictions of well-salaried office employees quitting their jobs to pursue their passions, some 2.6 million people still toil at White Castle, Burger King, Carl’s Jr., and the outlets of other fast food chains in the United States alone. They work late nights and early mornings (sometimes in succession) and face a greater risk of being murdered on the job than cab drivers or liquor store employees. What’s more, they often work for free.

Earlier this month, Fight for $15, a campaign of the Service Employees International Union, or SEIU, released a study on wage theft in the industry in California with some unsettling findings. Out of more than 400 workers the researchers interviewed in the first three months of 2022, 85 percent said they had experienced wage theft, and almost a third said they had faced retaliation for speaking out about their treatment or even taking a sick day. (The authors of the study assigned their results a 95 percent confidence level.)

Wage theft takes a few forms in the fast food industry. The most common tend to be clandestine, requiring employees to work through a meal or rest break and then not paying them for the extra time, or denying them paid sick leave. (California requires employers to pay a one-hour penalty for every break their workers miss and provide three paid sick days per year.) Those infractions may go unnoticed at first, but they can add up to a serious hit each pay day, especially for workers living at or below the poverty line. Most participants in Fight for $15’s study said they had experienced both these forms of theft. A minority (14 percent) said they experienced a more overt form of wage theft, by being required to work off the clock.

For longtime industry observers, the new numbers affirm a pattern. In 2014, SEIU commissioned a national survey, which, though widely castigated for being conducted entirely over Facebook, returned similar findings. Taken with prior academic research on the subject, the new figures make it harder to claim that wage theft is a problem limited to a few rogue managers, rather than one that’s endemic to the industry, as common to it as ground beef and potatoes.

If you know something about fast food’s business model, you probably know about franchising. In the 1950s and 1960s, when becoming an entrepreneur was harder than it had been in the past but the ideal of the independent businessman remained essential to the American mythos, franchising bridged the gap between an era of small business and one in which the economy (and the culture) were dominated by nation-spanning corporations. For a fee and a cut of the revenues, franchisees (or “owner-operators,” in industry parlance) could adapt the logos and methods of a major corporation to a business they owned themselves, allowing them a fiefdom within the empires of Taco Bell, McDonald’s, or Midas Muffler.

For both parties, it was the perfect opportunity. Corporations benefited from these quasi-independent entrepreneurs who staked their savings and dedicated their lives to the business in ways mere employees would likely not, while franchisees benefited from Madison Avenue ad campaigns, the buying power of a national organization, training for their workers, and managerial advice.

“The franchise offered an opportunity to own, and yet not to own, to risk and yet be cautious,” wrote the late historian Daniel J. Boorstin. “It democratized business enterprise by offering a man with small capital and no experience access to the benefits of a large capital, large-scale experiment, national advertising, and established reputations.”

Fast food wasn’t the first industry to grow through franchising, but the practice has been so integral to its expansion, the word is practically synonymous with burgers and drive-throughs. It also left patrons unsure where within their local Taco Bell or McDonald’s the domain of the corporation ended and that of the small-time businessperson began.

“While consumers could be more confident than ever of the standard quality of what they bought, they were haunted by a new puzzlement about whose product it was,” Boorstin wrote. “Who, if anyone, was really responsible in case what they bought wasn’t what it was supposed to be?”

For employees of franchised fast food restaurants today, the lines of accountability can be just as difficult to untangle, particularly when there’s a grievance to file. Since the corporations generally defer to franchisees on labor matters, they tend also to blame the franchisees when any labor-related problems arise at their stores.

But the widespread nature of wage theft makes it harder to attribute to the mistakes of a few bad owners. In a 2012 study, the economist David Weil found that employees at franchised fast food restaurants were owed, on average, $4,265 more in back wages than their peers at company-owned outlets, over a five-year period between 2001 and 2005. Weil, who later headed the Department of Labor’s Wage and Labor Division under Barack Obama, attributed the pay gap to the franchise system itself—or, more specifically, to the gray zone inherent in the franchise-corporate relationship and the murky labor practices the industry had adopted to fill it—a phenomenon he called “fissured employment.”

Fast food corporations mandated virtually all a franchise restaurant’s purchases, including food, equipment, and signage, but required a substantial cut of the revenues. That only left franchisees one area to cut costs—wages—and, he reasoned, one way to do it: by stealing them.

The lack of control inherent to franchising has not only compelled franchisees to rob their employees, it’s also made it harder for the government to bring either them or their corporate overlords to account for the infraction. “Franchising, third party management, and the spread of fissured employment create challenges for workplace policies that were built assuming simpler and more direct relationships,” Weil wrote.

The wage-theft issue is especially pertinent now as the fast food industry feels the weight of the Great Resignation, as over-stressed workers quit in droves and the ubiquitous McJob is getting harder to fill, even in California, where, at $14, the minimum wage is nearly twice the rate in the 20 states and two territories that only adhere to the federal rate.

But for the people still on the job, stolen wages can be the difference between sustaining the most basic standard of living or not. Speaking at a presentation organized by Fight for $15 earlier this month, Maria Bernal, a Jack in the Box worker and single mother of three in Folsom, California, said her employer required her to work 14 hours at a stretch without breaks but only paid her for eight. Over nine years, she said, she missed out on around $150,000 in compensation. Once she started helping one of her adult children pay rent, she couldn’t afford her own and ended up sleeping in her car with her youngest child, a toddler, for six months.

“Everyone has complained that they don’t get paid for all their hours,” she said in this month’s report. “They would promise me that if I worked Christmas Day, they would pay me double time, but they never did. This is what is happening to us in fast food—we don’t get paid for our work.”