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McDonald's Appeals Class Certification

McDonald's Corporation ("McDonald's," or the "Corporation") is appealing to the Ninth Circuit the District Court's certification of a class of more than 800 franchise workers who allege they weren't properly compensated. Plaintiffs claim managers violated the Fair Labor Standards Act by editing employees' time sheets to reduce hours, refusing to pay overtime, and banning meal and rest breaks.

A settlement has been reached between employees and franchise owners, but the case continues against McDonald's because U.S. District Judge, Judge Donato, ruled McDonald's is a joint employer under the ostensible agency theory. Ochoa, et al. v. McDonald's Corp, et al., No. 3:14-cv-02098 (N.D. Cal. July 7, 2016). Under this theory, a franchisor, i.e. McDonald's, may be a joint employer, despite not having daily control over the class members. The test for ostensible agency requires that "the person dealing with the agent must do so with belief in the agent's authority and this belief must be a reasonable one; such belief must be generated by some act or neglect of the principal sought to be charged; and the third person in relying on the agent's apparent authority must not be guilty of negligence." Hill v. Citizens Nat. Trust & Sav. Bk., (1937) 9 Cal.2d 172, 176.

In Ochoa v. McDonald's, the franchise owners are the agents, McDonald's is the principal, and the employees are the third parties dealing with the agents. Plaintiffs must prove that (1) employees believed franchisees were acting on behalf of McDonald's; (2) McDonald's had policies that enforced these beliefs and/or neglected to impress upon employees that franchise owners were their employers; and (3) the relying party was not negligent.

McDonald's contends that it was not a joint employer and that the franchisees were primarily responsible for the workers, which was an attempt to address Judge Donato's ostensible agency theory. As a joint employer, McDonald's could be held liable for wage and hour violations made by franchisees. In an attempt to suppress the lawsuit, McDonald's is appealing the workers' class certification.

Rule 23 of the Federal Rules of Civil Procedure, which dictates the necessary conditions for class certification, requires members of the class to have the same interests in filing a suit. On this basis, Judge Donato granted the employees' class certification, citing their common claims about unfair and illegal compensation.

On the other hand, McDonald's argues that employees at its franchises don't share the same understanding of their employment, which would mean they don't share an interest in the class action. Thus, McDonald's believes class certification would only be appropriate if the Plaintiffs prove each member of the class thought they were employees of the Corporation.

The timing of McDonald's appeal is belated, however. Since McDonald's failed to bring the issue to Judge Donato's attention before he granted certification, the Ninth Circuit court won't consider McDonald's appeal until after the trial, which is soon approaching in the District Court for the Northern District of California.

The legal team at SFMS has substantial experience litigating employment matters. If you have any questions regarding this subject or this posting, please contact Nick Lussier (nlussier@sfmslaw.com) or Chiharu Sekino (csekino@sfmslaw.com). We can also be reached toll-free at (866) 540-5505.

Shepherd, Finkelman, Miller & Shah, LLP, is a law firm with offices in California, Connecticut, Florida, New Jersey, New York, Pennsylvania and Wisconsin. SFMS is an active member of Integrated Advisory Group (www.iaginternational.org), which provides our firm with the ability to provide our clients with access to excellent legal and accounting resources throughout the globe. For more information about our firm, please visit us at www.sfmslaw.com.

SOURCES:

Sieniuc, Kat. "McDonald's To Appeal Class Cert. To 9th Circ. In Wage Suit." Law360. Portfolio Media, Inc. 22 July 2016. Web.

Waltemath, Joy P. "Jury to Tell If McDonald's Has Employer Status under 'ostensible Agency' Theory." Employment Law Daily. Wolters Kluwer, n.d. Web.

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