Some of California’s lowest-paid workers at fast-food restaurants report that their employers have shorted them on their paychecks. A survey, released today by Fight for $15, a campaign funded by the Service Employees International Union, or SEIU, concludes wage theft is a pervasive problem in an industry where top corporations earned billions of dollars of profit during the pandemic.

A whopping 85% of the more than 400 survey respondents in dozens of California cities said they experienced at least one form of labor law violation, such as insufficient overtime pay or not getting compensated for hours worked off the clock. Nearly 60% were victims of multiple types of wage theft, according to the survey, which was conducted by bilingual outreach workers with Fight for $15.

The report’s authors argue a big part of the problem is the franchise model common in fast food — namely, that the economic relationship between corporations and franchisees incentivizes the latter to cut corners on payroll, one of the few business expenses under their control. Meanwhile, corporations, which contractually control most aspects of franchise operations, are insulated by those same contracts from any responsibility for wage theft or other violations.[pullquote size="medium" align="right" citation="Ken Jacobs, chair, UC Berkeley Center for Labor Research and Education"]'It becomes very difficult to run a profitable store and follow labor employment laws.'[/pullquote]

The SEIU is co-sponsoring a bill in the state Legislature that would make California the first state in the nation to make corporations liable for any labor law violations affecting an estimated 550,000 fast-food workers. Most workers are adult people of color, including many immigrants, making close to minimum wage. In California, minimum wage is $14 an hour for employees in firms with 25 employees or less, and $15 an hour for larger businesses.

The consequences of wage theft

For years, María Bernal says she often completed double shifts of 14 hours a day at a Jack in the Box restaurant near Sacramento. But she was paid for only about two thirds of that time, she said.

“It made me very angry because I needed that money to pay for my expenses,” said Bernal, in Spanish.

The single mother of three, originally from Mexico, said she asked the store manager for the owed wages, but was rebuffed and even threatened with significantly fewer work hours if she kept raising concerns. Close to a third of respondents to the SEIU survey said they were retaliated against for requesting owed wages or compensation for a sick day.

About two years ago, when Bernal’s youngest son was 3 years old, she fell behind on her rent and the family was evicted. They slept in their car for about six months, she said. Her worst fear: that someone would break into their car while they were sleeping.

“It was very difficult,” said Bernal, 43. “I cried often just looking at my kids in that situation. I’d think, ‘God, how can we be living like this if I’m working so much?’”

In January, with the help of union organizers, Bernal filed a claim with the state agency tasked with investigating wage theft for $86,200 in unpaid wages over a period of more than three years. But the Labor Commissioner’s Office is struggling with understaffing, and there are years-long delays for hearings needed to resolve cases.

That means Bernal, and another fast-food worker who filed a wage claim with the agency, María Yolanda Torres, might not see a timely resolution in their cases. Even after state authorities rule in favor of workers, it’s often difficult for them to recover the money they earned.

'With the money I didn't get, I was planning to buy food'

Torres said her employer at a Subway franchise in San José refused to pay her for sick time off — the most common type of wage theft in the state, according to the survey. Her employer also erased dozens of accrued paid sick hours from her pay stubs without compensating her, she said, including when she missed work for a day due to a painful bladder infection.

“With the money I didn’t get, I was planning to buy food,” said Torres, 47, the mother of two kids. “I felt so disappointed or angry, because I reached him trying to get my money back. And he ignored me.”

[aside label="related-coverage" tag="wage-theft"]Other co-workers at the Subway who got sick with COVID weren’t paid either, according to the complaint Torres filed with the Labor Commissioner’s Office. California law guarantees at least three days of paid sick leave per year and up to two weeks of COVID-related sick leave for businesses with 26 or more employees, like the franchise where Torres works.

Bernal’s and Torres’s employers declined to respond to KQED’s requests for comment.

Many fast-food giants were highly profitable during the pandemic, as chains did not shut down operations as demand increased at drive-thrus. McDonald’s Corp., for instance, reaped nearly $10 billion in profits, as operating income, in 2021, according to company reports to shareholders noted in the survey.

But the financial picture can be remarkably different for the small-business owners who own the chains’ franchise stores, which represent the vast majority of fast-food restaurants, said Ken Jacobs, who chairs the UC Berkeley Center for Labor Research and Education.

Corporations charge franchisees expensive fees while controlling most aspects of operating a chain store, from the way stores look to the ingredients in meals. One thing franchisees can control is what they pay employees. That’s what makes shaving paychecks an attractive option for employers looking to bolster slim profit margins, Jacobs said.

“It becomes very difficult to run a profitable store and follow labor employment laws,” said Jacobs, whose own research also has found frequent wage theft in the fast-food industry. “The real responsible party there is the corporate headquarters. They’re the ones who are setting the rules that are creating the situation. But who the law currently holds accountable is the store owner because they are making that decision on the ground.”

Previous studies also have found high levels of wage theft in the fast-food industry. But industry lobbyists and representatives countered that the new results were misleading, partly because of the sample size of respondents.

“This survey relies on a small sample size and does not represent how McDonald’s and its local franchisees are focusing on the well-being of restaurant employees,” a spokesperson for McDonald’s Corp. said in a statement.

The spokesperson added that in 2021, McDonald’s increased hourly wages at company-owned restaurants by an average of 10%, and saw many franchises also raise wages and offer their staffers benefits like additional paid time off and tuition assistance.

“We will continue to focus on what’s most important to our people — including pay and benefits, training and growth opportunities, and recognition and appreciation — to attract and retain talent in this competitive hiring environment,” the spokesperson said.

Jack in the Box, Subway, Taco Bell, KFC, Carl’s Junior and other companies did not return KQED’s request for comment.

AB 257, known as the FAST Recovery Act, would allow workers to have a greater say in their labor conditions, by creating a council that includes them, as well as employers, franchisers and state labor enforcement agencies. The council would have the authority to set minimum standards for the industry and tackle problems like wage theft.

The bill, which passed the state Assembly with the minimum number of votes and now faces a battle in the state Senate, also would make fast-food corporations liable for fines for labor law or other violations by franchisees, and allow those small-business owners to sue corporations for contracts that prevent compliance with the laws.

Supporters contend that if the companies saw hits to their profits, they’d change franchise rules to ultimately improve working conditions for frontline workers.

David Huerta, president of SEIU California, said lawmakers should support vulnerable food workers who were considered essential at the height of the pandemic.

“Fast-food workers understand that they are victims of a system, cards that have been stacked against them,” he said. “They want a change.”

But Jeff Hanscom of the International Franchise Association, which opposes the bill, said the state should focus on enforcing the laws already on the books to address bad actors, rather than “taking away opportunities” from small-business owners. The proposed regulation would also hike fast-food prices, he said.

“In addition to forcing these hard working entrepreneurs to become employees of their brands, the FAST Act will increase prices at the worst time for millions of working Californians hit hardest by rising food, gas and housing prices,” Hanscom, who leads the associations’ lobbying efforts at the state level, said in a statement.

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Most Fast-Food Workers Are Victims of Wage Theft, Survey Finds