Dive Brief:
- Fast food giant McDonald's agreed to settle a lawsuit for $3.75 million that employees at one of its California franchises originally filed. CNBC reported that the workers charged the parent corporation with labor violations that they sued the franchisee for committing. If the settlement stands, the cost to McDonalds could be $1.75 million in back pay and damages to the workers and $2 million in attorney’s fees
- The case is an example of a growing trend known as joint employer liability. The 800 plaintiffs and their attorneys claim that McDonald is a “joint employer,” a designation that could make it liable for the actions of other franchisees. The workers had cited the franchisee for failure to keep accurate pay records, pay overtime and reimburse them for the time cleaning uniforms. The franchisee settled the original suit for $700,000.
- A McDonald’s spokeswoman refuted the “joint employer” claim, stating that McDonald’s agreed to settle to avoid the costs and disruption in operations that continuous litigation can cause.
Dive Insight:
The National Labor Relations Board acted on a similar “joint employer” case in August 2015. In Browning vs. Ferris, the NLRB ruled that a company contracting with another could be held liable for the other company’s misdeeds.
Regardless of McDonald’s reasons for settling the case, the ruling could be the next step in irreparably altering the relationship between the franchise and franchisee. Franchisees use the franchise’s brand and, in McDonald’s case, its processes, but usually runs the day-to-day operations independently. If that changes, McDonald's and other companies like it could suddenly see themselves liable for thousands more employees.
