By Julie Jargon
A former McDonald's Corp. franchisee in the U.S. who was accused
of mistreating foreign students who worked for him has agreed to
pay $205,977 in back wages and damages to 291 former employees, the
U.S. Department of Labor said.
Early last year, 15 foreign students who had worked in
McDonald's restaurants owned by Andy Cheung in central Pennsylvania
filed complaints with the State Department and Labor Department
saying he had underpaid them and compelled them to share cramped
living quarters owned by him or his son. The students were on
three-month J-1 visas for work and travel.
An investigation by the Labor Department's Wage and Hour
Division found that the company through which Mr. Cheung operated
his six McDonald's restaurants violated the minimum wage and
overtime provisions of the Fair Labor Standards Act.
"Cheung Enterprises not only failed to properly pay its
employees, it willfully took advantage of vulnerable student
workers living and working in our country under the J-1 visa
program," Al Gristina, director of the division's Wilkes-Barre
District Office, said in a press release. "This agreement will
ensure that the rights and wages of both U.S. workers and student
guest workers are protected."
Mr. Cheung said on Tuesday he didn't break minimum wage laws and
that he simply deducted employees' housing expenses from their
paychecks, in violation of Labor Department regulations, rather
than having the workers cash their paychecks and then reimburse him
for rent. In a telephone interview, Mr. Cheung said he disagrees
with the department's findings "but they are the ones who make the
determination. I didn't do anything wrong, I just regret the way I
did it."
The students, who came from Latin America and Asia, arrived in
the U.S. under the Summer Work Travel Program, which the State
Department's website says provides the opportunity "to experience
and to be exposed to the people and way of life in the United
States."
When the students arrived, they were assigned to work at Mr.
Cheung's McDonald's restaurants. Some said they were given so few
hours that they hardly earned any money after their boss deducted
rent from their paychecks. Others said they were forced to work
shifts as long as 25 hours straight without being paid for
overtime.
The 15 students who filed complaints demonstrated outside one of
Mr. Cheung's restaurants last March. Approximately two weeks later,
McDonald's said he had agreed to sell his restaurants and leave the
McDonald's system. The company said at the time that it takes "the
well-being of the employees working in McDonald's restaurants
seriously, " and that it had started investigating the situation as
soon as it heard about it.
Investigators found that Cheung Enterprises made improper
deductions from employee paychecks, bringing the rate of pay for
some employees below the federal minimum wage of $7.25 an hour, and
failed to pay some employees overtime wages. Investigators also
determined that the company charged the student workers excessive
rent that was deducted from their paychecks for substandard,
employer-owned housing.
Of the 291 employees to whom Mr. Cheung agreed to pay back
wages, 178 were foreign student workers.
In addition to the back wages and damages, Mr. Cheung has agreed
to pay a $5,000 civil penalty, the Labor Department said.
Write to Julie Jargon at julie.jargon@wsj.com
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