Workers embroiled in a class-action lawsuit against Jimmy John’s, the Champaign-based sandwich chain, won a major victory yesterday when a Chicago appeals court ruled workers can sue both the corporate entity of Jimmy John’s and its restaurant franchisees for denying them overtime wages.
The ruling, by the 7th Circuit Court of Appeals, reverses a previous district court order that prevented plaintiffs from suing franchisees.
Jimmy John’s had argued that workers should not be allowed to sue franchisees because of the risk of duplicative litigation and inconsistent rulings. The 7th Circuit judges, however, said that argument “is not persuasive.”
Jimmy John’s, founded in 1983 by Jimmy John Liautaud, did not immediately respond to a phone call requesting comment.
The decision to hold franchisees responsible could dramatically affect Jimmy John’s, which generates more than $2 billion in annual sales from more than 2,600 restaurants in the U.S.—98 percent of which are franchisee-owned. It has far broader implications, as well: At least 13 similar wage-theft cases against fast-food companies are currently winding their way through 12 federal districts across the country. Those include two in Illinois: one against Fox Restaurant Venture, a Champaign-based company owned by Peter Fox that includes 26 Jimmy John’s franchises in Indiana, North Carolina and South Carolina; and the other against Kidd Restaurants, based 40 minutes outside of St. Louis in Highland, Ill.
In November 2016, McDonald’s agreed to pay $3.75 million to workers to settle a lawsuit arguing it was liable for labor law violations by a franchisee in California. At the time, lawyers said it was the first time a company had settled legal claims by U.S. workers at a franchise. Previous labor law-related suits against the Oak Brook-based burger giant were settled directly by franchise owners.
Accusations of unpaid wages by employers have gained traction in recent years. In 2010, researchers at the University of Illinois at Chicago reported that wage theft costs low-wage workers in Cook County $379.6 million per year.
In a statement regarding yesterday’s Jimmy John’s ruling, the lead plaintiffs’ attorney, Seth Lesser of New York-based Klafter Olsen & Lesser, called the decision “a victory for workers across the country.”
“Too often, companies intentionally misclassify workers in an effort to mask what is essentially wage theft, ” he continued. “This ruling is an important step towards righting those wrongs.”