McDonald’s franchise owners fight wage theft crackdown

A sign at a McDonald's restaurant is displayed on Monday, April 29, 2024, in Albany, Ore. (AP Photo/Jenny Kane)

As New York state struggles to stamp out pervasive wage theft, workers have been left with little legal recourse against their bosses. In the state legislature, a far-reaching bill stands to change that — but it has faced intense corporate opposition, led by a group called New Yorkers for Local Businesses.

The “local businesses” apparently behind it? McDonald’s franchises.

New Yorkers for Local Businesses has spent nearly half a million dollars advocating against the bill this year. Public documents reviewed by New York Focus indicate that the group is led by a McDonald’s vice president who works in a Connecticut corporate office and two individuals who own a total of over 50 McDonald’s franchises in multiple states, one of whom has twice been sued for wage theft. The group solicits donations to a political action committee of the same name, which has almost exclusively been funded by McDonald’s franchise owners.

The “New York” group is registered to the California address of a prominent California lobbying firm that has attempted to overturn pro-worker legislation there, and its registration documents were filed by a California-based partner at the firm.

A recent advertisement from the group warns that the new labor enforcement law would “do even more damage” to businesses struggling in New York and that similar laws “haven’t worked in California.” New Yorkers for Local Businesses has also sponsored the state’s top political newsletters this spring, from Politico to City & State, placing frequent ads informing readers the law could force businesses to close.

The group characterizes itself as “a statewide coalition of small business workers, managers, and like-minded organizations that are fighting for policies that will create jobs, save jobs, and make New York more affordable.” It did not respond to requests for comment.

Beyond the vocal corporate opposition, the bill also has a quieter critic in the Public Employees Federation, the union that represents staff in the Department of Labor, which alleges that it would effectively privatize government enforcement — a claim that the bill’s sponsors and advocates reject, noting that civil penalties recovered under the law could boost the agency’s budget by more than $100 million annually.

Lawmakers are pushing to pass the bill, known as the EmPIRE Worker Protection Act, in the next few weeks before this year’s session ends.

“The problem is that people who would prefer not to pay their workers are not happy about the bill,” the bill’s Assembly sponsor Jo Anne Simon told New York Focus. “All they have to do is pay their workers and they won’t have any problem.”

Under the status quo, if a worker is a victim of a labor violation, it’s up to the Department of Labor to decide whether to pursue their claim. But enforcement has been on the decline, in part because the department has faced budget cuts and is understaffed.

An investigation by Documented found that between 2017 and 2021, federal and state investigators determined that at least 127,000 New Yorkers had wages stolen from them, totaling more than $203 million. (That number doesn’t include private lawsuits workers have brought for stolen wages, nor wage theft that goes unreported or uninvestigated.) As of last year, the state Labor Department had failed to recover more than 60% of the unpaid wages it found across those five years.

The Empowering People in Rights Enforcement Worker Protection Act would allow workers to take an employer to court directly and recoup civil penalties from their employer for violating wage theft, health and safety, and retaliation laws.

The penalties would be stiff, set at a minimum of $500 per worker for every pay period during which there was a violation. When a business pays up, 40% would go to the workers and 60% would go to the Labor Department to fund staffing and enforcement.

Unions and whistleblowers could also bring such claims, which advocates say will protect affected workers from retaliation.

The legislation’s backers say it would hold employers accountable for violating labor laws, deter them from doing so in the future, and create a new funding stream for the Department of Labor.

It aims to address “the crisis of enforcement,” said Francisco Diez, senior policy strategist for economic justice with the Center for Popular Democracy. “Workers in New York are suffering from having their wages and benefits stolen, suffering health and safety violations, and facing consequences of retaliation and losing their jobs,” he told New York Focus. “This bill will mean that their rights have more teeth than they’ve had in a long time, probably in most of their lifetimes working in New York.”

Workers can currently sue their employers for wage theft. But doing so is increasingly challenging.

“It’s really difficult to get a lawyer to take a one-off wage and hour claim because it’s not worth very much money. And it’s difficult to get employees to want to bring an individual wage and hour claim, because they’re worried about having a target on their back,” said Myriam Gilles, a professor at Cardozo Law and expert in class actions and aggregate litigation.

In the absence of state enforcement, that leaves workers with one option: class action lawsuits. But in the past decade, employers — buoyed by U.S. Supreme Court decisions in their favor — have increasingly put forced arbitration clauses in workers’ contracts that prevent them from bringing class action suits. More than half of private sector workers and 65% of low-wage workers have forced arbitration clauses in their contracts, according to the U.S. Department of Labor.

These forced arbitration clauses make it “almost impossible to bring” wage theft cases, Gilles said.

The EmPIRE Act would give workers an avenue to bypass forced arbitration clauses and bring collective cases.

The bill is backed by some of the state’s biggest unions — including 32BJ Service Employees International Union, the Communication Workers of America District 1, the state councils of the Teamsters, the Retail, Wholesale & Department Store Union, and the United Auto Workers in New York — in addition to immigrant and worker groups like Make the Road New York and New York Communities for Change.

The legislation is modeled after California’s Private Attorneys General Act, or PAGA, which also allows workers to sue their employers on behalf of the state. The vast majority of PAGA cases deal with wage theft, and the UCLA Labor Center and labor-aligned groups have published research finding that PAGA has improved compliance with labor law in California. In 2022, $200 million in penalties were collected under the law, which has provided a funding stream for the state’s labor department for more than two decades. Corporations there are trying to repeal it.

Business groups argue the New York legislation will kill jobs and increase prices. The most outspoken opposition has come from New Yorkers for Local Businesses, a lobbying entity that is linked to a fundraising PAC with the same name.

New Yorkers for Local Businesses registered as a nonprofit with the state last year, listing its address at the San Rafael, California office of the law and lobbying firm Nielsen Merksamer, which pitches itself as the “go-to firm in California for a company, non-profit association or individual dealing with state or local government.” The firm was involved in a lawsuit to overturn California’s FAST Act, a union-backed bill to reform the state’s fast food industry, and represented the California residents who filed for a ballot referendum to repeal the law.

The New Yorkers for Local Businesses registration document lists Elli Abdoli, a partner at Nielsen Merksamer, as the entity’s “filer.”

It also lists three “initial directors” under an address in Staten Island. All three individuals share the names of people who own and operate McDonald’s franchises or otherwise work for the company, according to their LinkedIn profiles, news stories, and lawsuits.

One of those directors, Roy Iraci, is reportedly from Staten Island and owns and operates 24 McDonald’s restaurants in New York, New Jersey, and Pennsylvania. Iraci and the holding company through which he owns the franchises have been named as defendants in at least two wage theft lawsuits. The first was a class action lawsuit filed in December 2022, which Iraci’s company paid $27,000 to settle.

The second class action lawsuit, which is ongoing, alleges that when the named worker first raised his legal complaint, Iraci showed up to his workplace and “forced” him to sign a document of an unknown nature. “Plaintiff had never seen the Company’s owner at his place of employment before,” the lawsuit says. The lawsuit also alleges that the worker faced retaliation after raising complaints.

The second director, Dave Singelyn, reportedly owns and operates 30 McDonald’s restaurants in New York and Pennsylvania. The third, Joe Chiczewski, appears to be the field vice president for the McDonald’s corporate office in Stamford, Connecticut.

New Yorkers for Local Businesses’ website lists testimonials from two individuals, “Renee Reardon, Restaurant Owner in the Capital Region” and “Cortesia Norman, Restaurant Owner in the Bronx,” asking Albany to oppose legislation that hurts small businesses. “I just hope they’ll consider how much local businesses mean to their communities, particularly in small towns like mine, before passing legislation that could wipe us out,” reads Reardon’s testimonial.

Both Reardon and Norman operate McDonald’s franchises, according to multiple local news reports on their restaurants.

“McDonald’s franchisees taking a page from the same playbook they did during the Fight for 15 is not surprising,” said Sol Freire Figueroa, labor campaigns director for New York Communities for Change, one of the groups backing the wage theft bill. “The owners of these franchises, who claim to represent the interests of ‘small businesses,’ aren’t fooling anyone: Many own dozens of stores and make huge profits.”

The New Yorkers for Local Businesses website prompts visitors to donate to the entity’s PAC, which is almost exclusively funded by people who listed their addresses as McDonald’s franchises or whose names match McDonald’s franchise owners. One donor to the PAC, franchisee George Michell, paid a $1 million settlement in 2022 after violating numerous labor laws. Another donor, Thomas Parker, shares the name of a McDonald’s franchise owner who was ordered to pay $155,000 to his employees by the city for violating labor laws.

New Yorkers for Local Businesses, Nielsen Merksamer, and McDonald’s did not respond to requests for comment.

New Yorkers for Local Businesses paid the firm Tusk Strategies, well known for helping Uber enter major cities and fight labor regulations, $40,000 for lobbying and $412,055 for advertising in the first four months of this year, according to state lobbying data.

Two other corporate lobbying groups, the National Federation of Independent Business and the Food Industry Alliance of New York, also reported lobbying on the bill.

On May 6, the New Yorkers for Local Businesses “coalition” — including the Partnership for New York City, the Business Council of New York, and local chambers of commerce — sent a letter to Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie urging them to oppose the EmPIRE Act. “The impact of this act would be endless litigation with private attorneys whose primary motivation is not necessarily the public interest,” the letter said. It was included the same day in an ad in Politico’s New York Playbook PM newsletter, which was “presented by” New Yorkers for Local Businesses.

The bill has the overwhelming support of the state’s unions, with a notable exception: the union that represents Department of Labor staff.

The Public Employees Federation has reported lobbying lawmakers on the bill, and issued a memo of opposition on May 3 warning that, “while well-intentioned, this legislation only furthers the privatization and watering down of public services to the detriment of affected workers and all New Yorkers.”

The opposition memo notes that the Department of Labor lost nearly 900 staff between 2013 and 2022 — more than 20% of its workforce — and needs more funding to beef up the agency. Proponents respond that more funding is exactly what the bill would deliver.

“To the extent that people are concerned that this would usurp the role of state investigators, the answer to that is our [labor] statutes have always contemplated that private attorneys would have a significant role in enforcement,” said Terri Gerstein, the director of the NYU Wagner Labor Initiative and former deputy commissioner at the state labor department. “Private lawyers bringing cases has always been part of the picture.”

“They misunderstand the proposal,” said Simon, the Assembly sponsor. “No government enforcement agency can keep up with the level of violations out there.”

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This story originally appeared in New York Focus, a non-profit news publication investigating how power works in New York state. Sign up for their newsletter at https://tinyurl.com/368trn9p.


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