On June 11, 2018, the State of California found the Cheesecake Factory Restaurants, Inc. liable for wage theft against subcontracted workers. The decision reinforces the imperative that companies perform labor rights due diligence on all of their third parties, including those outside their corporate production and processing activities.

The decision found the company responsible for $4.57 million in unpaid overtime to 500 workers managed by a separate janitorial company. The company in question had subcontracted the work, and is also liable. Investigators found that “After working for eight hours, the (…) workers were not released until Cheesecake Factory kitchen managers conducted walkthroughs to review their work. These walkthroughs would frequently lead to additional tasks that the janitorial workers had to complete before they were released for the day. This resulted in each worker logging up to 10 hours of unpaid overtime each week.”

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The case brought attention to a common flaw in many compliance programs. Although human rights due diligence usually focuses on supply chain actors involved in production and processing activities, liabilities associated with other third parties are often overlooked.

Subcontracted Workers Susceptible to Labor Rights Violations

In the service industry, subcontracted laborers are among the most vulnerable in the entire supply chain, and are frequently the victims of wage theft. Since the work is outsourced, companies are often unaware of the labor rights violations faced by those working in their own facilities. Failing to consider the human rights impacts of all third parties poses a legal liability in California.

Under Assembly Bill 1897 (California Labor Code Section 2810.3), employers are responsible for wage and compensation violations for any work performed within the usual course of business (i.e. regular, customary and performed within or upon the premises or worksite of the employer). This includes work contracted out by the employer.

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This decision is a clear message that the state’s Department of Industrial Relations will continue to be vigilant in holding businesses accountable for labor violations — even if the workers in question are subcontracted. Failing to identify and mitigate the risk of these issues can lead to a range of negative repercussions, including financial and reputation damage, and supply chain interruptions.

Assent’s Corporate Social Responsibility Suite Can Help

A vital component of the Assent Platform, our Human Trafficking & Slavery solution helps companies identify and mitigate the risk of labor rights violations in their supply chain. The solution leverages the Slavery & Trafficking Risk Template, a surveying standard that aligns with requirements associated with a broad range of labor and human rights legislation across the globe.

For more information about how Assent can help you comply with labor rights legislation, contact Assent Compliance’s experts today.

Sarah Carpenter
Director, Corporate Responsibility

Sarah specializes in promoting business respect for human rights globally. Following the 2013 Rana Plaza collapse in Bangladesh, she took on a leadership role as an advocate and influencer for human  Read More

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