A federal judge in Missouri ordered Steak ‘n Shake to pay $7.7 million in total damages after a jury agreed that the company was wrong by not paying overtime to a class of 286 managers in the St. Louis market.
The judge awarded the managers $6 million, plus various attorney’s fees, doubling an award following a February jury trial finding the company liable for federal wage and hour violations.
The managers accused the burger chain of improperly classifying them as exempt, then requiring them to work 50 hours or more per week, frequently performing nonmanagerial tasks while restaurants were understaffed.
The managers worked in the St. Louis area, a market where several Steak ‘n Shake restaurants have recently been temporarily closed. The burger chain, a subsidiary of San Antonio-based investment company Biglari Holdings, has closed 44 restaurants temporarily, apparently to prepare them for franchisees, as the chain’s same-store sales have fallen 7.9%.
Steak ‘n Shake is facing a similar class-action lawsuit covering managers outside of the St. Louis area. That lawsuit features a class of more than 1,000 store managers.
Biglari Holdings revealed the lawsuits in a recent federal securities filing, in which the company said it plans to appeal the February jury verdict “and vigorously defend our position in this action.”
Still, the award for damages comes as the chain is struggling to lift itself out of a deep sales slump.
The chain has seen same-store sales fall for 10 straight quarters and recorded a $19 million loss in the first three months of the year after revenues declined 10.6% to $170 million.
Steak ‘n Shake owns 367 of its 580 restaurants, not including the locations that have been temporarily closed, and franchisees operate the rest. The company is planning to refranchise all of its corporate stores in a managing partner model similar to Chick-fil-A, selling the stores to qualified operators for $10,000 and then splitting profits.
Few of the locations have been refranchised as of yet.