Puzder Reportedly Out As Labor Secretary Nominee

A look at the retirement plan run by CKE Restaurants offers some food for thought about why the company's CEO, Andrew Puzder, backed away from the post of Labor Secretary.

After multiple delays, the confirmation hearing for President Trump’s Department of Labor (DOL) Secretary nominee, Andrew Puzder, was expected to kick off tomorrow, February 16, before the U.S. Senate. Instead, late-breaking news has emerged that Puzder is no longer the president’s pick. 

Puzder is not exactly an unknown figure in Washington, thanks to his role as chief executive of CKE Restaurants, the parent company of the Hardee’s and Carl’s Jr. fast food franchises, a job he has held since September 2000. Adding to insight gleaned from his previous lobbying activities, scores of old interviews and even op-ed pieces penned by Puzder himself have surfaced since President Trump gave him the nod for Labor Secretary, clearly spelling out his rhetorical stances on issues ranging from the minimum wage to sexism and harassment in the workplace.

Well-known or not, the Trump administration has apparently decided months after first nominating him that Puzder is not actually fit to hold a top role in federal government. The retirement industry will be closely following the news and eager to get a glimpse of whoever might take Puzder’s place—what the new nominee’s priorities and leadership style might be when it comes to federally regulated employee benefits.

Preliminary commentary shared with PLANADVISER had suggested there was little reason to think Puzder would back away from his free-market philosophy during confirmation hearings. Whether asked about wage fairness issues, discrimination in the workplace, the role of union labor, automation, outsourcing or any of the other challenges facing U.S. workers, Puzder was expected to espouse fairly traditional Republican values. It remains to be seen what will be the character of Puzder’s replacement. 

NEXT:  What went wrong for Puzder? 

In hoping to learn more about the way Puzder thinks about labor issues, a natural place to look is the company he has run for the better part of two decades. While he had many strong supporters in the business community, left-leaning media outlets had reported widespread claims of sexual harassment and wage theft among his low-level workforce, and others have cited his comments to the effect that more automated customer service is the most likely result of raising the minimum wage. Little had been suggested about the way CKE Restaurants specifically views the role of employee benefit plans.

CKE Restaurants is not currently publicly traded, but it once was. CKE’s common stock was originally listed on Nasdaq in October 1981 under the ticker “CARL.” As the company’s website recounts the story, the original offering price was $12.54 a share, not considering any subsequent stock splits. “The stock was re-listed on the NYSE in June 1994, where it began trading under the symbol CKR. CKE was acquired by Columbia Lake Acquisition Holdings, Inc., an affiliate of Apollo Management VII, L.P. on July 12, 2010. Pursuant to the terms of the merger agreement, CKE's stockholders were entitled to receive $12.55 in cash, without interest, less any applicable withholding taxes, for each share of CKE common stock owned by them.”

SEC 10-K filings and other forms are available from the company’s ride as a publicly traded entity, offering periodic glimpses into the way its leadership has handled and adjusted compensation and employee benefits, prior to its return to private ownership.  It is risky to draw any broad conclusions from individual SEC documents, but there is some informative information throughout the filings about the way the company approaches its own 401(k) plan. For example, there is evidence that the firm now and again suspended its discretionary matching to the plan as business conditions changed.

In a 2012 10-K filing, the firm explained, “we sponsor a contributory 401(k) plan to provide retirement benefits under the provisions of Section 401(k) of the Internal Revenue Code for eligible employees, except certain hourly operations employees and highly compensated employees.”

The filing shows participants could elect to contribute up to 25% of their annual salaries on a pre-tax basis to the 401(k) plan, subject to the maximum contribution allowed by the IRC. “Our matching contributions are determined at the discretion of our board of directors,” the document shows. “During fiscal 2012, the successor 29 weeks ended January 31, 2011, the predecessor 24 weeks ended July 12, 2010 and fiscal 2010, we did not make matching contributions to the 401(k) plan.”

According to a Form 5500 analysis by BrightScope, owned by the same parent company as PLANADVISER, the CKE Restaurants Holdings retirement program scores just 50 out of 100, called out for its “high fees” and “low generosity.” Despite this, in fact the plan actually has an above-average score for the restaurant industry as a whole. In its peer group, other scores include:

  • Del Frisco's Restaurant Group / 55.8
  • Apple American Group / 52.4
  • Burger King / 50.1
  • Urc, LLC / 49.9
  • Legal Sea Foods, LLC / 49.8
  • Papa Gino's / 47.7

It should also be observed that proprietary PLANSPONSOR data shows the restaurant industry has the lowest retirement plan participation of the 18 industries tracked.