Why is Chipotle Off the Hook?
Though fast-casual chains have a certain do-gooder appeal, their working conditions aren’t much better than those at more traditional fast-food restaurants.
Earlier this year, Democratic presidential candidate Hillary Clinton tweeted out support for fast-food workers striking for better wages, writing that they “shouldn’t have to march in the streets for living wages.”
Two days earlier, Clinton had stopped at a Chipotle located in a suburb of Toledo, Ohio. The event was covered in obsessive detail, as the public learned that her order was a chicken burrito bowl with guacamole. But one thing didn’t get much attention: By stopping in at a Chipotle, Clinton was participating in the same low-wage economy she’d condemn only a couple days later.
It was certainly an oversight, but understandable in the context of the Fight for $15 movement, which has zeroed in on the struggles of fast-food workers—but not fast-casual workers—to make its point that the United States needs a minimum wage much higher than the current federal rate of $7.25 an hour.
A seemingly quixotic effort when it began in the wake of Occupy Wall Street, the Fight for $15 campaign has notched some significant victories since then. Twenty-one states and Washington, D.C., raised their minimum wage this year, and some cities, including Seattle, Los Angeles, and San Francisco, have approved increases to $15 an hour, to be phased in over time. In New York, after political dysfunction derailed a recent effort to raise the minimum wage, Governor Andrew Cuomo recently ordered the fast-food industry to increase pay to $15 an hour in New York City by the end of 2018, with the rest of the state to follow before the end of 2021. Among Democratic presidential candidates, there isn’t a debate over whether the minimum wage should be raised—they all agree on that—and the only disagreements concern when this should happen and by how much.
The push for a higher minimum wage has taken on added urgency in recent years because many of the jobs created in the wake of the Great Recession pay less than those they replaced. According to a study conducted by the National Employment Law Project, as of last summer, there were 2.3 million more workers in positions paying less than $13.33 an hour than before the recession.
A huge number of these low-wage workers are in the fast-food industry, which explains why it’s been such a focus of the minimum-wage debate. According to the Department of Labor, the food-and-drink industry added 1.3 million positions between February of 2012 and April of 2014. The National Restaurant Association, the lobbying organization representing the industry, claims the entire sector was responsible for adding 1,000 jobs a day in 2014.
Naturally, the Fight for $15 has homed in on some of the companies with the biggest shares of these jobs. Both McDonald’s and Yum Brands (the parent of Taco Bell, KFC, and Pizza Hut) are among the 10 largest private-sector employers in the United States, and, while leaders of the Fight for $15 movement declined to comment for this article, their thinking seems to be that if the biggest players in fast food can be pressured into improving salary and pay, others will fall in line.
It’s likely this strategy has been working, at least in a public-relations sense, because fast food is something of a punching bag in American culture, derided for low-quality food, and blamed, in part, for the obesity epidemic.
That’s not true for higher-end establishments such as Chipotle, which are collectively known as “fast casuals.” They are, it seems, viewed as fast food without the guilt. According to Mintel, a market-research company, 92 percent of respondents in a 2013 survey said they considered “treating employees well” to be one reason for choosing a fast casual option. And Experian Marketing Services reports that Chipotle’s customers are the most left-leaning of all the major fast-food chains. The author Jonathan Safran Foer, who came up with the idea for Chipotle to publish short works by prominent writers on its packaging, explained his work on the initiative’s behalf by saying, “I wouldn’t have done it if it was for another company like a McDonald’s.”
But for workers, these companies are not quite so different. The National Labor Relations Board recently issued a ruling demanding that Chipotle offer to rehire a former St. Louis employee who, they found, was fired for his participation in the Fight for $15 campaign.
And for Sabrina Johnson, who discovered the Fight for 15 while working at McDonald’s and then went on to a Chipotle near Harvard’s campus, the wages and working conditions at the Mexican chain, while better, were not better enough for her to stop supporting the movement. When Johnson, who left Chipotle this summer, spoke to the Harvard College Democrats this past spring about her experience there, she says students expressed shock when they heard that she made $9.63 an hour. One even told her, she recalls, “I thought Chipotle paid more, because they had such high standards.”
“I don’t think there’s really that much of a distinction in terms of working conditions between fast casual and fast food,” says Irene Tung, a senior researcher at the National Employment Law Project. “They’re relying on the same low-wage business model as McDonald’s.”
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While the line between traditional fast food and fast casual can be blurry—quick, is Five Guys Burgers and Fries fast food or fast casual?—the telltale sign is the holistic-sounding descriptions used to describe the fare. Chipotle’s slogan, “Food with Integrity,” is certainly the most famous, but at almost all these restaurants words such as “fresh,” “natural,” and “organic” abound. Depending on the establishment, “sustainable” is a word used to describe everything from the soda cups—the Washington, D.C., salad establishment Sweetgreen boasts of using “100 percent plant-based compostable packaging”—to how the food is grown or raised.
The combination of culinary wholesomeness, environmental holiness, and relatively low prices has made fast casuals very attractive to customers, and thus very lucrative. While McDonald’s just ended a year and a half of stagnant sales growth, fast casual is on a tear. According to Technomic Inc., a market-research firm, sales across the sector increased by almost 13 percent last year, a growth rate more than double that of any other type of restaurant.
Even with its recent E. coli outbreak, Chipotle is the star of this world. Its growth, though slower now than in the past, has been astonishing. The chain went public in 2006, debuting on the New York Stock Exchange with an initial public offering price of $22 a share. At the time, there were just under 500 Chipotles in existence. Today, the stock is trading above $500 per share and there are more than 1,900 Chipotle outlets, with another 50 scheduled to open by the end of the year.
The burrito-giant’s leadership has been getting generously rewarded for this success. Steve Ells and Monty Moran, Chipotle’s co-chief executive officers, are among the highest-paid executives in the restaurant business, earning more than $28 million apiece in 2014. That is a lot of money, even by American-CEO standards. Starbucks’ CEO Howard Schultz, for example, earned $21.5 million in 2014. In a rare event for an American corporation, a majority of Chipotle shareholders last year gave a thumbs-down to Ells and Moran’s compensation packages. Alas, the vote was non-binding.
Chipotle, however, is significantly less generous with the vast majority of its restaurant staff. While it does pay more than companies in the traditional fast-food sector, it’s still far from offering what could reasonably be considered a living wage. Chipotle spokesman Chris Arnold says the average crew member—that’s an entry-level employee—receives a little more than $10 an hour. As of last week, the website Glassdoor, which relies on users’ reporting, indicated that a McDonald’s crew member can expect to earn about $8.26 an hour, while the same job at Taco Bell results in $8.45 an hour, versus Chipotle’s reported $9.14.
Might Chipotle employees see a $15-an-hour wage anytime soon? When I asked Arnold that, he responded, “We don’t have positions on these issues.”
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One day in the fall of 2014, lunchtime customers got a surprise when they visited a Chipotle located near the campus of Penn State in State College, Pennsylvania. The restaurant was closed. Instead of a getting a burrito, they found a sign on the front door suggesting they contact Chipotle’s corporate offices to ask why its employees are subjected to “borderline sweatshop conditions.”
The short-lived strike—the establishment was open for business again by the end of the day—was led by Steve Healy, a 23-year-old philosophy major at Penn State who then worked as a manager for the chain. Healy’s career at Chipotle had begun two years earlier, in the sort of haphazard way many people end up working at a restaurant. He was about to begin a position at Walmart when the Chipotle job came through with an offer of $8.20 an hour. “Chipotle seemed like a cool place to work,” he recalled. “It was the image.”
The reality was different. In Healy’s account, Chipotle was not much more than a McDonald’s that had been heavily influenced by Portlandia. The company, he said, did a good job of offering and marketing a quality product. On the other hand, he said his location was chronically understaffed and overworked. A computer spat out corporate time-management demands, dictating how long everything from dicing onions to cutting cilantro and frying chips should take. “You assign which person has the task in the morning, then you type in the quantity and then it punches out how long it’s supposed to take that person to perform the task,” he explains. There was only one problem, he says: “Reality doesn’t line up with the times.” (Chipotle did not respond to a request for comment about this time-management system.)
Chipotle dismissed the strike at Healy’s store as the action of a “few employees” who quit. But the conditions at the Penn State location don’t seem to be out of line with the chain’s general strategy: Chipotle’s emphasis on maximally efficient service is no secret in the fast-food industry or investment community. The line customers proceed down to order their bowl, burrito, or salad is a finely choreographed process, and the company has its own parlance for the assigned positions. “Linebackers,” for example, are there to make sure the food bins are replaced promptly, so the staff rolling the burritos does not get distracted from their task. An “expediter” is placed between the burrito line and the cash register, and is responsible for filling drinks and getting customers their chips, so the cashier can concentrate on ringing up sales. Through this, the company uses security cameras to record employees, though it says the purpose is more security than job performance.
All this is intended to increase the number of sales per hour—and it has mostly worked. In the fourth quarter of 2014, Chipotle boasted an average of three additional transactions during their peak lunch service, which is between noon and 1 pm. and five during the peak dinner rush, between 6 pm and 7 pm. In the first quarter of 2015, they added an additional 21 transactions across the entire day. That adds up quickly, considering that Chipotle has just under 2,000 locations.
It is not offensive for a company to scrutinize the data its restaurants generate, but how this mandate for ever-quicker service impacts workers seemingly depends on foot traffic and a given store’s management. For Sabrina Johnson, the former employee, it meant that, unless she was on break, she was in motion, doing whatever the daily printout assigned her to do at any given moment. When she’s wasn’t stationed behind the cash register—her primary responsibility—she walked out into the customer area, where she wiped down tables and emptied the trash. Sometimes she worked the line, rolling tortillas.
Having every minute on the clock accounted for on a corporate printout sounds exhausting, but, according to Steve Healy, Chipotle’s actions sometimes go beyond simple micromanagement. Healy claims there was frequent pressure to work off the clock with truncated or untaken breaks so area managers could meet the budget targets set by Chipotle’s headquarters.
His allegations are not a one-off. A number of lawsuits making similar claims have been filed against Chipotle over the past two years. “We believe that the evidence has shown that labor budgets are set strictly and centralized by corporate for each restaurant, and because the labor budgets are set so strictly, we believe the evidence will show that essentially the individual restaurant managers … to meet labor [budgets] are having to have people work off the clock,” said Karen O’Connor, a Colorado attorney representing a number of plaintiffs in cases concerning Chipotle.
And when employees express dissatisfaction with their tasks, the reaction can be less than sympathetic. James Kennedy, an army veteran who works at a suburban Philadelphia Chipotle, claims in a case that was heard by the National Labor Relations Board earlier this fall, that he was laid off after he tweeted and talked to other employees about the less than savory aspects of working at Chipotle. When managers objected to his tweet about earning $8.50 an hour, he deleted it, but they fired him after he asked his coworkers to sign a petition complaining about a lack of promised breaks. (Chipotle says in its NLRB filing that Kennedy was let go because of his “threatening behavior” toward a manager when she asked him about the petition.)
Another lawsuit, filed on behalf of more than 500 Chipotle workers, gets to the heart of something Chipotle uses to bolster the case that it is an excellent employer—the chain’s promotions policy. The “careers” portion of Chipotle’s website shows a progression that begins at “Crew” and proceeds through various stages of management, all the way up to the coveted position of “Restaurateur,” a job that pays more than $100,000 annually and includes the use of a company car.
More than 90 percent of managers at Chipotle begin as crew members. Last year Chipotle says it promoted more than 10,500 people from crew positions into management. The policy has won Chipotle fans among advocates for low-wage workers. “Chipotle has a stand-out internal mobility program,” said Saru Jayaraman, the co-founder of Restaurant Opportunities Centers United, an advocacy group campaigning for higher wages and better working conditions for the nation’s restaurant workers. “It’s extraordinary.”
But the lawsuit paints a more complex picture, arguing that instead of having numerous supervisory responsibilities, many of Chipotle’s managers are essentially low-level employees with supervisory titles. The main result of these grand-sounding promotions is not an upgrade in responsibility and authority, but an increase in work hours without the benefit of the overtime pay they should have received for any work in excess of 40 hours a week, says Melissa Stewart, a lawyer with Outten & Golden, one of the law firms representing the workers who have joined the case.
Brittany Swa, now 30, says this was her experience when she worked for Chipotle in Centennial, Colorado, from 2010 to 2012. Except for gaining the privilege of locking and unlocking the restaurant’s door, “everything was exactly the same as when I had gotten hired from my training from crew member,” Swa recalled of her promotions. “I would come in and I would be set in a certain position. I might be the cashier. I might be on tortilla. I was in an actual physical position doing manual tasks every day just like the rest of my crew.”
Chipotle declined to make anyone available for an interview, but spokesman Chris Arnold wrote in an email, “We won’t comment on pending legal actions, but I would note that lawsuits are nothing more than allegations. All of our employment policies and practices are compliant with applicable laws.”
Even if the courts decide in Chipotle’s favor, those policies might not be legal for long. Practices like those Chipotle is accused of are the target of the Obama administration’s attempt to revise the requirements for overtime pay. Federal regulations currently say salaried workers earning more than $23,660 can be denied overtime pay if they are classified as working in either executive, administrative, or professional positions—a nebulous standard. Under the proposed regulatory change announced this summer, anyone earning less than $50,440—that’s a little more than $900 a week—would need to be paid overtime when they are on the job more than 40 hours in any given week.
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Earlier this year, McDonald’s announced it would raise its starting wage to $1 an hour higher than local law requires, effective this summer. Instead of receiving hosannas for agreeing to pay their new employees an average of $9.90 an hour, a reported increase of more than 10 percent. McDonald’s plan was denounced by many as a weak response to the growing momentum of the Fight for $15 movement and other workers’ rights campaigns.
A big reason the wage hike was panned was because McDonald’s announcement was all but meaningless for most of the workers staffing its locations. The vast majority of people earning a paycheck for their work at the chain are not employees of McDonald’s but are instead employed by individual franchisees, who own almost 90 percent of McDonald’s locations.
These franchisees—not the corporation whose name graces the premises—decide what they will pay the employees in the restaurants they own. This is true for all the traditional fast-food giants—Burger King, KFC, and Subway are all almost entirely franchised.
Because of this, part of the Fight for $15’s strategy is to attack the franchise model on the legal front, claiming that the corporate home office has more control over pay and scheduling at the franchised outlets then it admits. Since, the logic goes, corporate provides the scheduling software the franchisees must use and dictates standards for how the food is prepared, it should also be able to set wages. It’s a controversial legal interpretation, even though it has met with some success: Last year, the NLRB deemed McDonald’s a joint employer in a number of cases where workers at franchised locations had been fired for taking part in union-organizing campaigns. This ruling, should it hold up, would shatter the foundation of the franchise model and would likely be litigated for years as a result.
But this lawsuit will barely affect fast-casual establishments. Chipotle does not franchise at all. It’s the direct employer of everyone who works in its locations. Shake Shack doesn’t franchise either. At Zoe’s Kitchen, only three out of 165 outlets are franchised. At Noodles & Company, only 13 percent are owned by franchisees. Panera Bread, where many restaurants are controlled by franchisees, corporate headquarters still controls just under half of the outlets.
Yet there is no question that the fast casuals, with their more upscale, more politically liberal customers, are sensitive to the issue. Ron Shaich, the founder and CEO of Panera, has said that he supports the Obama administration’s efforts to raise the federal minimum wage to $10.10, but that competitive pressures are preventing him from simply offering that to his employees absent legislation requiring everyone to do so. Meanwhile, Chipotle has most recently burnished its image by beginning to offer all employees paid sick and vacation days, not to mention up to $5,250 in college-tuition assistance.
Without new labor laws mandating more generous compensation, examples of corporate benevolence are few and far between. Pete Turner opened his first Illegal Pete’s in Boulder in 1995, about two years after the first Chipotle opened. The scale of his enterprise is a bit different: He’ll be opening his sixth—and first out-of-state—location in Tucson later this year. Like Chipotle, Turner’s restaurants offer up Mexican food. Unlike Chipotle, it’s making a commitment to living wages, having bumped up entry-level pay to $10.50 an hour—not quite the dream of Fight for $15, but still a start. “If you can take the unease and uncertainty out for a large segment of the population, the nation’s going to be better off,” Turner explains. “It’s great that we can provide better ingredients and a nicer environment, but can you treat the people you’re employing better?”
But Turner is simply one business owner. Barring a massive social change, most workers in both the fast-food and fast-casual industries will receive more sustained income boosts not thanks to sympathetic management, but new laws.
Helaine Olen is a columnist for Slate and the author of Pound Foolish: Exposing the Dark Side of the Personal Finance Industry and co-author of the upcoming The Index Card: Why Personal Finance Doesn’t Have to be So Complicated.
Co-published with The Atlantic.