Rough Cuts

Outback Steakhouse sways politicians with money straight from its workers, whose gifts are taken straight from their paychecks. But do employees feel pressed to give? And do they even know where their money is going?

[Editor's note: This article has been corrected since it was originally published.]

  • See Outback's response.

    Andrew Fitzgerald cooked steaks at Outback Steakhouse for four years before he received a promotion in 1995 to kitchen manager, a position with a $22,000 base salary. A few weeks later, the chain's regional manager called Fitzgerald into the cramped business office of the Savannah, Georgia, restaurant. He asked Fitzgerald to sign a consent form authorizing Outback to regularly deduct money from his paycheck for the company's political action committee. "It's just best if we all give a little," Fitzgerald recalls the manager saying.

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    Fitzgerald signed the form, he says, because he felt he had no other choice. "Let's face it. When the big boss asks you to do something -- and not doing that may hinder reaching your ultimate goal -- you're going to do it," he says. Like most Outback kitchen managers who agree to the deduction, Fitzgerald chose to give the suggested minimum. On his next paycheck stub, Fitzgerald saw the contribution listed right next to the deductions for Social Security and income tax -- "$5 PAC." "I just saw it leave my paycheck every two weeks," he says, "and I always wondered what it was for."

    Mother Jones interviewed 30 current and former Outback managers, whose biweekly paycheck deductions -- documented in state campaign finance records kept by Florida, where the PAC is registered -- helped make Outback's PAC the largest of its kind in the restaurant industry. While many said that they didn't mind contributing to the PAC -- some were even happy to -- nearly one-third claimed they felt pressured, like Fitzgerald, to donate. And most were only vaguely aware of the PAC's political aims. Ironically, Outback uses contributions from its lower-level managerial staff to fund political positions generally at odds with working-class interests. The PAC has used its money to oppose an increase in the minimum wage and to fight the creation of a national health care plan. It also spent $10,000 in California to support Proposition 226, the so-called Paycheck Protection initiative, which would have required unions to obtain written permission annually before they could use their members' dues for political activity -- holding unions to a much higher standard than Outback's PAC.

    Outback, meanwhile, maintains that it doesn't put any pressure on its employees. "We go out of our way to make people know it's entirely voluntary," says Joe Kadow, the attorney who runs Outback's PAC in Tampa, Florida. "It's a payroll deduction that can be stopped anytime."

    Wade Rogers, a former kitchen manager from Bradenton, Florida, shares the sentiment of many Outback employees. "It was no big deal," he says of his $5 contributions. "It [is] a real good company." In Rogers' case, those contributions amounted to $320 over 27 months. Add his small contributions together with those of hundreds of others from Outback, and you have a very big deal: Contributions of less than $200 accounted for $104,067 of the $356,368 the Outback PAC received in 1997. Because the FEC does not document sub-$200 PAC donations, 29 percent of the PAC's receipts last year would be untraceable if not for Florida's unusual full-disclosure requirements.

    Critics claim that by having bosses ask employees to give to the PAC, Outback is exerting unfair pressure. "Anytime -- and this goes for labor relations and political campaign contributions -- a person in a position of authority and control over your economic livelihood asks you for a donation, it isn't voluntary," says John Boardman, executive secretary-treasurer of the Hotel and Restaurant Employees Local 25, AFL-CIO, in Washington, D.C. "If you turn it down, you paint a target on your chest," he says.

    Scott Behrends, a former restaurant manager from Raleigh, North Carolina, who contributed to Outback's PAC for 20 months, describes the $5 deduction as "not really one of those things you questioned." Says Behrends: "If you wanted to advance in the company, you weren't going to say anything. They're not really making you give $5 a paycheck, but they encouraged it at every managers' meeting: 'Have you signed up?' 'Have you not signed up?' I felt pressured to do it, but they didn't force us."

    Others have similar accounts:

  • Seth Kaplan, a former restaurant manager from Hollywood, Florida, contributed $180 to the PAC over the course of two years. "I just did it because they said I should," says Kaplan. "They kind of implied you had to do it. They said everyone does it and let you know how much you contributed compared to others."

  • "It's understood that this is your next level, this is what you do," says Kurt Charland of Florence, South Carolina, a former restaurant manager who worked at Outback for seven years. "It's on a volunteer basis, but it's brought up if you don't contribute."

  • "Everyone was doing it," says Chris Lunsford, a former kitchen manager in Greenville, South Carolina. "It was just one of those things. I didn't know where the money went…. I was employed by them, and I didn't care."

  • "I'm not into politics. I've never voted in my life," says Devin Nelson, a former kitchen manager from Houston, Texas, whose PAC contributions added up to $300 over 21 months. "The manager said that pretty much everyone did it, [and that] we should do our part."

    Kirk O. Hanson, professor of business ethics at Stanford University, says that while it is perfectly fair for a company to ask employees to make political donations, the donations can't be considered voluntary if employees have reason to feel that refusing to donate will hurt their careers. Hanson says there is always a risk that managers will feel the need to "put the squeeze on their subordinates, because they believe that they will look better in the eyes of senior management if a high percentage of their direct subordinates give." He also says that this problem could be avoided if someone other than the employee's boss requests the PAC contribution and if employee participation in the PAC is kept private. When these steps are not taken, Hanson says, "then I think there's a potential for pressure and abuse."

    Soliciting lower-level workers represents an apparently new extreme in a long-standing mechanism of corporate political giving. Major corporations such as NationsBank, Marathon Oil, and Johnson & Johnson have long collected PAC contributions from employee paychecks. Because these contributions rarely exceed $200 a year, there are no federal disclosure requirements. According to FEC spokesman Ian Stirton, political action committees can record thousands in such contributions without ever documenting their source.

    Steve Stockmeyer, spokesman for the National Association of Business PACs, says that the FEC's regulations on who is eligible to donate to a corporate PAC are unclear. "Companies are sensitive to putting the arm on lower-paid employees or those who don't make policy decisions within the company," he says. But, he adds, about the only commonly held rule is that "you don't solicit your hourly [wage] people."

    While Outback doesn't ask its waiters or its kitchen help to donate to the PAC, it does make that appeal to all of its salaried employees. Outback managers are usually first wooed to participate in paycheck deductions "at management orientation and management training sessions," says Outback's Kadow. The company tells them that the PAC's federal and state contributions are given to those candidates who will help the company's 528 restaurants nationwide prosper. The message is clear: What's good for the company is also good for them.

    Because it is difficult to convince employees to make political contributions, Stockmeyer says, a company must show "that there are [legislative] concerns which affect their livelihood and the company's." For many Outback employees, especially those in upper management, the company's rhetoric holds true; political giving seems only natural. Eric Yeagle, part-owner of a Carrabba's Italian Grill (a subsidiary of Outback) franchise in Colorado, says the PAC helps the company and the restaurant industry as a whole: "[Politicians] are making decisions about the industry," he says, "and if our voice isn't heard, then we're screwing ourselves."

    Such PAC-funded goals as a low minimum wage and the defeat of a national health care plan, objectives that Kadow terms "pro-free enterprise policies," may help preserve profits and shareholder value, to the benefit of Yeagle and other upper management. But it's less clear how these policies benefit the company's blue-collar lower management.

    Like others, Edward Tamez, a manager from Campbell, California, signed up for the deduction because his boss suggested it. "We were told that if the minimum wage went up 25, 35 cents, that it would ruin American businesses," he says.

    Tamez chose to protest the PAC's anti-minimum-wage stance, not by withholding his funds, but by making "a mockery" of giving: He requested a deduction of $5.75 -- then the proposed minimum wage in California.

    When Tamez received a report fully informing him of the PAC's contributions, however, he found the whole affair less amusing. "I looked at the list [of candidates]. These are some bad people," he says. "Newt Gingrich was on the list." Tamez first saw the list more than nine months ago, and although he vehemently disagrees with the PAC's politics, he still hasn't gotten around to ending his deductions. "I should stop that PAC stuff," he says. "I'm tired of paying it."

    But it's unlikely that Tamez, or others like him, will ever take the initiative to get off the rolls. Because employees who participate in a paycheck deduction never write a check and because corporations never have to resell the idea to them, says Stockmeyer, "they don't feel the pain each time." Though Outback's PAC did not supply Mother Jones with exact numbers, Kadow concedes that "not many" decide to stop the deductions.

    Meanwhile, Outback's CEO, Chris Sullivan, has invoked labor unions as an inspiration to his employees and fellow restaurateurs, saying that they set the example of how to best collect money. In a 1994 editorial for Nation's Restaurant News, he wrote: "While some employees may not like being asked to contribute to a business political action committee (PAC), remember that labor unions have no such sensitivity about turning their members' mandatory dues into political influence. How difficult can it be to get employee support for a PAC when TGI Friday's, S&A [Steak and Ale] Restaurants, Cracker Barrel, General Mills, Brinker, McDonald's, Outback and many others have all made it work?"

    To restaurants like Outback, though, unions ultimately represent the enemy. According to Don Thoren, who runs the National Restaurant Association's PAC, the restaurant industry is one of the main supporters of the current movement to impede unions from using their members' dues for politics. Thoren says the reason a company like Outback would support Proposition 226, which was defeated in June, is that "if [unions] have less money, then they won't be able to put minimum wage [initiatives] on the ballot."

    Jack Dolan, data analyst for Investigative Reporters and Editors, provided campaign finance database research for this story.

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