San Diego lawsuit spotlights worker classification risks for Trader Joe’s vendors

San Diego County filed its first major labor enforcement lawsuit against employers on June 18, accusing grocery-store sushi operators of dressing workers up as franchisees while controlling the job from top to bottom. The complaint says the model let companies avoid minimum wage, overtime, meal and rest breaks, paid sick leave and workers' compensation, even as the labor took place inside stores where grocery chains sell fresh prepared foods alongside packaged goods.

The county named Ace Sushi Franchise Corp., Asiana Management Group, Inc., Advanced Fresh Concepts Franchise Corp., Advanced Fresh Concepts Corp., FujiSan Franchising Corp. and Fuji Food Products, Inc. as defendants. The case grew out of an investigation by the San Diego County Office of Labor Standards and Enforcement into how sushi workers were classified, paid, managed and required to operate inside grocery stores across the state. A worker complaint to the Employee Rights Center helped trigger the case, and Branden Butler, Paloma Aguirre and Alor Calderon announced it on International Sushi Day at a morning press conference at the County Administration Center.

The county alleges the companies controlled store locations, menu items, pricing, promotions, stocking requirements, delivery deadlines, operating procedures, inspections and required purchases. The contracts allegedly required chefs to rent equipment, pay food costs and pay franchise fees, while workers were paid by commission rather than hourly wages. The county says many sushi workers worked seven days a week and more than 50 hours a week at a single grocery location.

Trader Joe's offers medical, dental, vision, paid time off and internal promotion pathways, a very different setup from the contractor model in the San Diego complaint. The store's ready-to-eat sushi and other prepared foods show how grocery retail keeps moving closer to restaurant-style foodservice.

California's AB 5, signed in September 2019 and effective January 1, 2020, applies the ABC test to decide whether a worker is an employee or an independent contractor for state labor purposes. Misclassification can strip workers of payroll taxes, minimum wage, overtime, meal periods, rest breaks and workers' compensation. Grocery-store sushi sales have topped $2.5 billion nationally and climbed more than 60% since 2020.