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Wage Theft. Dishonest Franchises. Papa John's.

August 12, 2015

Papa John's is everywhere. Its 4,500 restaurants, most run by franchisees, are in all 50 states and 34 countries. The Louisville Cardinals play their college football in Papa John's Stadium, while Papa John himself regularly appears in TV ads with his business partner, Denver Broncos quarterback Peyton Manning. And as the business press has been reporting, CEO "Papa" John Schnatter is making his pizza's "quality" the focus of his company's marketing:

"We are finding ways to more effectively communicate our commitment to using the best quality ingredients. That has always been part of what distinguishes Papa John's from the rest."

But more and more, what apparently distinguishes Papa John's from its competitors is cheating its workers.
The company revealed its latest episode of wage theft during its second quarter results that showed net income was down to $10.8 million from $16.7 million a year ago:

In the second quarter, the Company recorded a pre-tax expense of $12.3 million for a preliminary legal settlement, subject to court approval ("Legal Settlement"). This collective and class action, Perrin v. Papa John's International, Inc. and Papa John's USA, Inc. which included approximately 19,000 drivers, alleged delivery drivers were not reimbursed in accordance with the Fair Labor Standards Act ("FLSA"). The Company continues to deny any liability or wrongdoing in this matter.

The plaintiffs, led by former pizza driver William Perrin of St. Louis, charged that Papa John's engaged in "a corrupt scheme in which drivers 'kicked back' money to the company by receiving lower reimbursements for the use of their vehicles to deliver pizzas." The result, as the Kentucky Center for Investigative Reporting (KYCIR) explained, was that delivery workers were often paid far less than the minimum wage.

According to the complaint, drivers were typically paid between $1 and $1.50 per delivery, regardless of distance, rather than the 45 to 55 cents per mile rate recommended by AAA and the IRS. That scheme cost the drivers $1.50 to $5.33 per hour, giving them a net hourly pay ranging from $1.48 to $5.75, according to the lawsuit.

If this story of cutting corners with workers' wages sounds familiar, it should. Just last month, New York Attorney General Eric Schneiderman secured a guilty plea from a Bronx franchisee whose 9 Papa John stores illegally took wages from his employees. Sentenced to 60 days in jail and owing $460,000 in back wages and a $50,000 fine, "BMY Foods Inc. failed to pay about 300 current and former employees the minimum wage and overtime, and also filed fake quarterly tax returns to hide their actions." And as the New York Times also noted:

Schneiderman won judgments of almost $3 million against two other Papa John's franchises in other wage theft cases this year.

That Papa John's and its franchisees are in trouble for pumping up profits at employees' expense is unsurprising. Like a fish, the rot starts with the head. In August 2012, Mitt Romney fundraiser John Schnatter warned that "Obamacare will cost 11 to 14 cents per pizza," adding, "If Obamacare is in fact not repealed, we will find tactics to shallow out any Obamacare costs and core strategies to pass that cost onto consumers in order to protect our shareholders best interests." As a former Papa John's VP dismissed in 2002 described Schnatter, "He has a passion for being wealthy." That passion is reflected in his stunning mansion, private jet and multimillion dollar St. Regis penthouses. As Mitt Romney put it during an April 2012 fundraiser at Schnatter's estate:

"What a home this is, what grounds these are, the pool, the golf course, you know if a Democrat were here he'd look around and say no one should live like this," said Romney, as the crowd began to laugh. "Republicans come here and say everyone should live like this, all right."

No matter what it takes. Especially if it is taken from workers.


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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