Dive Brief:
- Jimmy John's will pay $1.8 million to settle wage and hour claims brought forth by employees under the Fair Labor Standards Act, according to Law360. The collective action settlement was approved in an Illinois federal court on Monday.
- Sixty-six assistant store managers employed by Jimmy John's will receive settlement checks and over 500 managers employed by franchisees will receive three gift cards valued at $300 total.
- The lawsuit began with a July 2014 complaint brought by two plaintiffs, who were employed by independent franchisees, alleging the operator misclassified assistant store managers so they were exempt from overtime pay. The lawsuit became a collective action in 2015 after similar lawsuits were filed.
Dive Insight:
While Jimmy John's will be paying settlements to company employees, previous rulings spared it from an even larger settlement related to franchised employees. An Illinois federal judge previously rejected claims that Jimmy John's jointly employed franchised employees, and those individual claims were dismissed based on that decision. But these individuals were never formally taken off the lawsuit, according to Law360. Under this deal, plaintiffs claim that they will avoid potentially losing during an appeal.
Joint employer liability has been a contentious issue for several years, but the U.S. Department of Labor narrowed its definition under the Fair Labor Standards Act in 2020. Under the new definition, restaurants can only be held accountable for franchisee employment infractions if the franchisor hires and fires these employees, manages staff employment records, among other employment-related oversight. This definition will make it more difficult for franchised employees to bring forth joint liability claims under the FLSA going forward. The National Labor Relations Board also published a final ruling on joint employer regulations last year providing a similar definition.
QSRs have also seen their fair share of overtime violation lawsuits in the last few years. McDonald's paid a $26 million settlement in 2019 related to claims that it violated California's overtime rules. Franchisees have also been paying large claims too, with a Panera franchisee agreeing to pay $4.6 million in 2020 to settle a class-action case after assistant managers claimed they were wrongly classified as exempt from overtime pay.
