To date, there has never been a time for restaurant operators where the complexity of compliance exceeded that of their practical ability to react, says Dan Murdoch, the vice president of marketing at workplace management platform Harri.
That, however, has changed, especially for quick-service brands in some of America’s biggest markets.
We’ve now reached an inflection point that’s forcing companies to reevaluate scheduling practices and, essentially, the entire structure of how they combat labor challenges and control costs.
In September, more than 30 current or former Chipotle employees in Brooklyn voiced their issues with the brand and the city, as well as a local union, which led to New York suing Chipotle for Fair Workweek Law violations.
The regulations of that law went into effect in November 2017, and required fast-food employers to provide workers with an estimate of weekly hours, days, and times of work prior to their start of employment and two weeks’ notice of schedules. Employees had to agree in writing to last-minute schedule changes, and the company was also prescribed to give people opportunities for additional hours instead of just bringing on more part-timers.
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Additionally, it notes, no quick-service restaurant can force any employee to work two shifts with fewer than 11 hours between the end of the first and beginning of the second, when the first ends the previous calendar day or spans two calendar days. The brand has to pay the worker $100 for each instance. Essentially, get consent and fork up a premium for so-called “clopenings,” where workers close a store and then return the following day to open it.
At its core, the law is meant to give hourly workers more stable schedules and paychecks, as The New York Times points out.
Yet that’s just a sample of how complex and deep this goes. You can check out the full deal here.
The September lawsuit was the first brought against a publicly held corporate quick-serve under the Fair Workweek Law. Many other chains have felt its weight since.
Back in November, Shake Shack addressed it by saying, “These regulations add a significant amount of inefficiency to our labor model, removing the ability for more dynamic scheduling, and adding payroll costs and administrative burden to the of our managers,” CFO Tara Comonte told investors. She was lamenting Chicago and Philadelphia formally implementing “a similar labor legislation to the Fair Workweek that we have in New York City over the last two years.”
CEO Randy Garutti added Big Apple locations have “certainly seen an impact,” and “that's been a hard thing on our margins.”
Labor-related expenses were 27.3 percent of Shake Shack’s sales in Q3, a 30-basis point increase from the year-ago period.
“We are working hard on a number of initiatives to mitigate these headwinds by continuing to remove inefficiency from elsewhere in our model, taking various administrative tasks out of the Shacks with Project Concrete, and optimizing both our scheduling methodologies and improving our tools to support them,” Comonte said.
A small sample of just how disruptive this can be for multi-unit restaurant chains.
Here's a look at the case NYC makes for the law, and how it benefits workers.
The challenge isn’t just tied to Fair Workweek, either. Chipotle was also fined $1.37 million in January for more than 13,000 child labor violations and other state wage and hour violations in Massachusetts. The company was accused of having minors work too late into the night, without work permits, and exceeding the nine-hour daily and 48-hour weekly limits.
Wendy's said Wednesday it agreed to pay $400,000 to resolve allegations that it violated child labor laws by having teenage employees at dozens of Massachusetts restaurants work later and longer than laws permitted. Investigators found the brand was violating two child labor laws by allowing 16- and 17-year old employees to work past 10 p.m. and more than nine hours per day.
The state attorney general said its investigators looked into more than 2,100 violations at 46 corporate Wendy’s. The burger chain noted, in response, it changed its employee scheduling system to ensure compliance. “We are committed to being a responsible employer, with the goal that all employees have a rewarding experience as valued members of our team,” the company said in a statement, as shared by The Associated Press.