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McDonald’s Not Liable for State Labor Law Violations, No Control of Wages at Stores

McDonald's front counterA federal judge in northern California issued its decision earlier this month stating that franchisor McDonald's Corporation does not control the wages paid to workers at restaurants owned by franchisees and is not liable for violations of the state's labor laws. The judge granted the franchisor's motion for summary judgment finding that the workers did not support their argument that the labor code's definition of an employer extends to companies that "ostensibly" control wages through an agent.

Under Guadalupe Salazar, et al. v. McDonald's Corp., et al., U.S. District Judge Richard Seeborg had granted McDonald's request to deny class certification for the worker plaintiffs on January 5, 2017. He also granted its motion to strike plaintiffs' representative claims under the California Labor Code Private Attorneys General Act of 2004 (PAGA). The workers who allege labor violations were employed at restaurants owned by Bobby O. Haynes and Carol R. Haynes Family Limited Partnership in Oakland, California. The lawsuit, filed in 2014, originally represented more than 1,200 current and former employees in the Oakland area.

In another case in the same district court, a different judge granted McDonald's request for summary judgment on the company's direct liability for specific labor law violations, but denied it on the issue of "ostensible" agency. In Ochoa v. McDonald's Corp., filed in March 2014 and certified as a class in May 2015, the parties agreed to settle the case. McDonald's agreed last November to a $3.75 million settlement, $1.75 million in back pay and $2 million in legal fees. In that case, the franchisee, the Edward J. Smith and Valerie S. Smith Family Limited Partnership, had agreed to settle claims for $700,000.

At that time, attorney Barbara J. Chisholm of Alshuler Berzon, representing McDonald's, explained in a declaration to the court, "To the knowledge of my co-counsel and me, this is the first ever employment class action with McDonald's involving a certified class of crew members working in franchise-operated stores."

McDonald's Corporation has been targeted for the past four years by the Service Employees International Union (SEIU), representing thousands of low-wage workers under the "Fight for $15" movement. The organization is pressing for $15 minimum wage and better working conditions. Last October, 15 female workers filed complaints against McDonald's and its franchisees with the Equal Employment Opportunity Commission on sexual harassment claims. And in a National Labor Relations Board case, union-backed "Fight for $15" claims McDonald's is a joint employer of franchise workers who allege they faced retaliation for joining nationwide strikes.

McDonald's Corporation firmly denies the accusations in those cases.

Yahoo Finance last week reported on this month's decision stating that a final determination is probably still years off, but the losers in last week's decision already have announced plans to appeal the summary judgment to the Ninth Circuit Court of Appeals.


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About Janet Sparks

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Public Profile

Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.