(Corrects name of franchisee company throughout)
RIO DE JANEIRO, Feb 24 (Reuters) - Brazilian unions have filed suit alleging that the largest operator of McDonald’s restaurants in Latin America violates Brazil’s labor laws, a case that could lead to fines of up to 30 percent of annual sales.
According to the suit filed on Monday in Brazil’s federal labor court in Brasilia, violations committed by Arcos Dorados Holdings Inc. amount to “social dumping” and help McDonald’s Corp. illegally undercut competitors and boost profit.
The suit seeks an immediate order to end the practices described in the suit and an injunction banning the opening of any new McDonald’s restaurants in Brazil until the problems are fixed.
It also seeks restitution of lost pay and damages for the rights violated. No figure was mentioned, but fines under Brazilian labor law can vary between 1 percent and 30 percent of a company’s annual sales.
The suit is backed by two of Brazil’s largest labor federations, CUT and UTG, as well as the Washington, DC-based Service Employees International Union (SEIU). It comes as U.S. unions representing retail and fast-food workers are pushing to boost pay and benefits for jobs that frequently pay the minimum wage or little more.
The unions accuse Arcos Dorados of a variety of violations under Brazil’s extensive labor code, including unwholesome and unsanitary working conditions, time-clock fraud and failure to pay mandatory unemployment and retirement insurance.
It also says Arcos Dorados paid below legal or contractual minimum wages, forced double-shift work without breaks, forced workers to take in-restaurant lunch breaks with employer-supplied food and failed to make mandatory severance payments.
Arcos Dorados said in a statement that it has not yet seen the content of the lawsuit but defended its labor practices, saying the company “is absolutely confident in its labor practices and in the meeting of all the norms and laws it is subject to in all the places it works.”
It also said it abides by agreements with Brazilian labor prosecutors over past labor law violations.
With regard to the accusation of social dumping, the suit asks the court to refer the case to CADE, Brazil’s anti-trust regulator, on grounds that the company’s labor practices violate competition laws. (Reporting by Jeb Blount; Editing by Dan Grebler)