Pizza franchisee jailed for wage violations

Papa John's franchise

Most employers know that failing to pay minimum wage or overtime pay to their employees can lead to serious consequences. When employees file lawsuits claiming unpaid overtime wages, they can bring in their co-workers, leading to lawsuits which are both costly to defend and to settle. Further, reports by employees can lead to disruptive investigations by the Department of Labor. But one Papa John’s franchisee in New York has found that the stakes can be even higher—he was sentenced to 60 days in jail in addition to paying $230,000 in restitution to his employees.

Violations + cover-up = fines + jail time

The franchisee, Abdul Jamil Khokhar, failed to pay overtime wages to more than 300 current and former employees. To make matters worse, he attempted to cover up his failure to pay. In an elaborate scheme, Khokhar created fictitious employees to take credit for hours worked over 40. He would then pay real employees their regular pay rate, no matter how many hours they worked per week.

Khokhar pleaded guilty to a misdemeanor for failing to pay wages, as franchise owners can be personally liable for wage violations in the Empire State. His company pleaded guilty to falsifying business records, a felony.

Penalties under federal and Oklahoma state law

While Khokhar’s penalties were handed out under New York law, he could have been convicted of a misdemeanor under federal law as well. Under federal law, any person who willfully violates the Fair Labor Standards Act — meaning they willfully fail to pay minimum wage or overtime wages to employees — is guilty of a misdemeanor. For a first violation, offenders can receive a fine of up to $10,000. For any subsequent violation, an offender is subject to the same fine plus up to six months in prison.

Oklahoma law also authorizes jail time for wage violations. Under the Oklahoma Minimum Wage Act, a person who pays or agrees to pay any employee less than minimum wage is guilty of a misdemeanor and is subject to up to six months in jail.

Criminal prosecutions the new trend?

There may be some momentum behind criminally punishing those violating wage laws. In a stump speech this September, Hilary Clinton stated, “I’m going to make sure some employers go to jail for wage theft.” The New York Attorney General also recently charged another restaurant owner for failing to pay minimum wage and overtime to her employee. Khokhar’s violation was particularly egregious given that he falsified records in an effort to cover up his violations of the law, but his prosecution may be the beginning of a trend rather than simply an exception.

Employers must recognize that failure to comply with state and federal wage laws can have serious consequences that extend beyond civil liability. While prosecutions are rare, political figures have begun wielding their political capital to start enforcing them.

Photo credit: Ildar Sagdejev/Wikimedia Commons