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McDonald's to Pay Close to $750k in Unpaid Overtime Wages for Overnight Workers

McDonald's Restaurants of California Inc. ("McDonald's" or the "Company") will likely have to pay approximately $750,000 for violating state overtime laws due to its handling of overnight shifts. Los Angeles Superior Court Judge Ann Jones decided on April 20, 2017 that the Company violated the state's overtime law, and therefore, was liable to pay damages to the affected workers. However, Judge Jones subsequently ruled, on June 9th, that the workers failed to prove the violations were willful, which limited the damages to approximately $750,000.

The named plaintiff, Maria Sanchez, originally filed suit in January 2013, alleging wage and hour violations. After other plaintiffs later joined the case, in August 2013, Judge Jones certified a class of approximately 6,600 individuals.

McDonald's allegedly assigned all hours in an overnight shift to the day in which the shift started, which meant workers who had an overnight shift followed by a daytime shift often worked over eight hours in a 24-hour period, but received no overtime pay. Additionally, Judge Jones found that the Company's practice of calculating its 24-hour days based on a 4 a.m. start time, instead of the usual 12:01 a.m., resulted in workers getting paid for fewer hours of overtime than they would have otherwise. Judge Jones also noted the inconsistencies in the implementation of that practice. If the Company could prove that the policy was universally applied, it could be argued that it made the policy in good faith and was unaware of its negative side effects. On the other hand, inconsistent application of such a policy would make it appear as though it was only implemented when it was advantageous for the Company. Thus, McDonald's argued that its computer system and Company norms caused near universality of the policy. Judge Jones disagreed, and ruled that McDonald's evidence was inconsistent with its earlier discovery responses.

Despite Judge Jones' findings that the Company's practice was inconsistent, she found it was not a willful violation of the overtime law. One of the attorneys representing the workers, Michael Rubin ("Rubin") of Altshuler Berzon LLP, disagreed with Judge Jones' finding that the Company's violations were not "willful" even though it intentionally kept the practice of assigning all work time to the date the shift started and calculating 24-hour days based on a 4 a.m. start time, both of which violated California state labor law. Rubin argued that, "Willfulness under the [California] Labor Code simply means the employer intended to do what it did, not that it intended to break the law." However, the Judge agreed with the Company's "legal good faith" defense, which essentially means that it had sincere intentions and acted without any malice or desire to harm others. Kathryn Froehlich, who worked in information technology for McDonald's, testified about the Company's timekeeping policy of assigning all hours worked in a shift to the day in which the shift started by stating that, "We wanted to keep the shift together, that it was the right thing to do when someone was working overnight, to ensure that they were paid for the full shift." She also testified that "we believed what we were doing was right," and that before this case, there had been no complaints about the practice in the past.

Willful violations of labor law in California incur additional financial penalties. Therefore, if it is eventually found that McDonald's violations were willful, the amount of damages would exceed the approximate damage calculation of approximately $750,000 that is currently slated to be awarded to the plaintiffs.

In addition to monetary damages, Rubin said he would ask the Court to prohibit the Company from maintaining its unlawful timekeeping practices going forward. Presently, McDonald's continues to assign all hours worked in a shift to the day in which the shift started and calculates a workday as starting at 4 a.m. Plaintiffs' counsel has expressed an intention to file objections within the 10-day period set before the tentative ruling becomes final.

The legal team at SFMS has significant 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, and Pennsylvania. SFMS is an active member of Integrated Advisory Group (www.iaginternational.org), which provides us 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

Greene, Kat. "McDonald's Faces $750K OT Damages For Overnight Workers." Law 360. Last modified on June 9, 2017.

Siegal, Daniel. "McDonald's Loses Calif. OT Fight, Queuing Up Damages Trial." Law 360. Last modified on April 20, 2017.

Siegal, Daniel. "McDonald's Rep Testifies Calif. OT Policy Was Fair." Law 360. Last modified on May 30, 2017.

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