On October 1, 2019, the Ninth Circuit ruled that McDonald’s Corp. (“McDonald’s”) could not be held liable as a joint employer for certain wage and hour violations committed at restaurants owned and operated by a McDonald’s franchise owner in the San Francisco Bay Area. Because McDonald’s does not exercise direct control over the wages or hours of the franchise owner’s employees, the Ninth Circuit did not allow those employees to bring their wage and hour claims against McDonald’s.
Employees of eight McDonald’s restaurants in the Bay area filed a class action lawsuit against McDonald’s Corp. and the franchise owner (“Haynes”) that operated the restaurants. The employees claimed that they were not properly paid for overtime hours or for missed rest and meal breaks because Haynes (their direct employer) used a faulty computerized time keeping system provided by McDonald’s.
The employees claimed that the timekeeping system was not properly designed to track overtime hours or rest and meal periods. The employees argued that by encouraging Haynes to use the faulty timekeeping system, McDonald’s was responsible for causing Haynes to under pay them.
The Ninth Circuit here followed earlier cases decided by the California Supreme Court, which ruled that a company could be a “joint employer” of another company’s employees if it has a right of general control over daily operations, wages, hours or working conditions of those employees. Key in this case was that McDonald’s exercised no direct control over the wages, hours, or working conditions of the restaurant employees. Haynes interviewed, hired, trained, supervised, disciplined and fired its employees. Haynes set the schedules and monitored time entries and Haynes set the wages and paid the employees. The only thing McDonald’s required of the employees was that they wear standard uniforms and keep them clean. However, the Ninth Circuit ruled that the limited control in order to maintain quality control or “brand standards,” often present in franchise models, is insufficient to establish joint employment.
COUNSEL TO MANAGEMENT:
This area of law is still developing and future cases could increase the risk of joint employer liability for franchisors like McDonald’s. If you are a franchisor and have concerns about the risk of potential wage and hour claims by your franchise owners’ employees (or if you have any questions about time keeping, overtime or rest and meal periods), contact the experts at the Saqui Law Group, a division of Dowling Aaron Incorporated.