Obama Administration’s Unilateral Wage Hike at Military Bases’ Fast Food Restaurants May Result in Closings

Washington, DC- U.S. Senator Tim Scott (R-S.C.) joined a group of five other Republicans on the Senate labor committee in a letter to U.S. Secretary of Labor Thomas Perez asking how the Department of Labor decided to mandate a wage hike at fast food restaurants at federal sites, including military bases. The Department’s new mandates will negatively impact South Carolina, which has a significant military footprint, including nine military installations – Air Force Bases, Marine Corps Bases, Navy Bases and a National Guard Base. A recent Military Times article, entitled “Some fast food outlets closing on military bases,” detailed several examples of how fast food restaurants were closing, including one at Naval Weapons Station Charleston, in large part to new, costly federal mandates. U.S. Military Exchange Service Command officials have warned that “the shift in policy will lead to a number of restaurant closings at our military installations,” the senators write in their letter to Secretary Perez. “We seek an explanation of how these shifts in policy regarding the calculation of ‘Fast Food Industry’ wage determinations under the Service Contract Act came about, whether military families were consulted in this decision, and whether fast food restaurants can expect additional increases in the future,” they write. Under the Service Contract Act, federal contracts for services of more than $2,500 must pay a prevailing local wage plus fringe benefits. In June 2013, the Wage and Hour Division (WHD) for the first time included a health and welfare fringe benefit component, which would have added an additional $3.81 per hour to wages of fast food industry employees working under the Service Contract Act. After a request from the Department of Navy, WHD reduced the surcharge to $.92 per hour. In the letter, also signed by Senators Lamar Alexander (R-Tenn.), Mike Enzi (R-Wyo.), Richard Burr (R-N.C.), Johnny Isakson (R-Ga.), Orrin Hatch (R-Utah), and Lisa Murkowski (R-Alaska), the members write to “encourage DOL to consult and engage with restaurant operators and military family groups on this policy change and to further discuss and consider the potential negative impacts this new policy may have on military families and employment on our military bases.” They write, “Not only does this mandated benefits expansion set a precedent that future increases could be decided without stakeholder input, we share the concern of Navy, Army, and Air Force Exchange Service Command officials that the shift in policy will lead to a number of restaurant closings at our military installations. Indeed, many restaurant employers at military installations are already operating near break-even levels. When these inflated wage and benefit requirements are combined with the food pricing restrictions found in most service contracts, many may be unable to remain profitable. If these contractors cease operations at our military installations as a result of the Wage and Hour Division’s shift in policy, it is our military and their families who suffer the consequences of lost jobs and fewer meal choices.” Senator Scott discussed the effects of the Obama Administration’s unilateral wage hikes in more detail during a recent panel. A clip is availableHERE. A copy of the original letter to Secretary Perez is availableHERE.