Dive Brief:
- Under California law, McDonald's is not a joint employer of its franchisees' workers and therefore cannot be held liable for a franchisee's wage and hour violations, the 9th U.S. Circuit Court of Appeals has ruled (Salazar, et al. v. McDonald's Corp., No. 17-15673 (9th Cir. Oct. 1, 2019)).
- A group of approximately 1,400 employees in the Bay Area sued McDonald's, claiming that they were denied overtime premiums, meal and rest breaks and other benefits in violation of state law. The employees worked at McDonald's franchises operated by the Haynes Family Limited Partnership.
- A federal district court granted summary judgment to McDonald's, and the 9th Circuit affirmed. McDonald's was not an employer under the law's definition, which requires control over workers' wages, hours or working conditions. It also did not meet the "suffer or permit" definition of employer, or the common-law definition (which turns on the "right to control the manner and means" of the desired work result). While evidence suggested that McDonald's may have been aware Haynes was violating state laws, said the 9th Circuit, "there was no evidence that McDonald's had the requisite level of control over plaintiffs' employment to render it a joint employer under applicable California precedents."
Dive Insight:
While this case dealt specifically with California law, it's nonetheless good news for employers concerned about joint employer liability — an issue that, despite recent attention from lawmakers, remains in flux.
When two businesses are found to be joint employers, both can be held liable for legal violations. The issue often comes up in situations involving franchise relationships (as here), contracting arrangements and staffing agencies. Courts and agencies use various tests for determining whether a joint employment arrangement exists under various laws. As a result, employers have said compliance is overly complicated in an area where the stakes are high.
McDonald's, for example, also recently was challenged on joint employment by the National Labor Relations Board after franchisees' employees alleged they were fired for advocating for a $15 minimum wage. The parties settled that charge, but the Board — now with several of President Donald Trump's appointees in place — has proposed changes to its joint employment definition that would reduce employers' exposure to liability.
The U.S. Department of Labor, for its part, has proposed a four-factor test for determining joint employer liability under the Fair Labor Standards Act that also is largely considered more employer-friendly than the Obama administration's position.
