On October 1, 2019, the Court of Appeals for the Ninth Circuit affirmed the ruling of the district court and held that McDonald’s is not a joint employer of one of its franchisee’s workers.
McDonald’s U.S.A. LLC is a franchisor, that contracts with franchisees, such as the Haynes Family Limited Partnership (“Haynes”). Approximately 1,400 employees at a Haynes-operated McDonald’s franchise filed a lawsuit against McDonald’s and Haynes for wage and hour violations. The class claims that the defendants denied overtime premiums, meal and rest breaks, and other benefits, in violation of California wage and hour statutes.
The question of an employer-employee relationship is central to nearly every employment law issue. Employers have certain legal obligations to their employees, and without an employment relationship, these legal obligations no longer hold.
As a franchisee, Haynes clearly has an employment relationship with the defined class in this matter, and reached a class-wide settlement in March 2017, offering both injunctive and monetary relief.
The central question before the Ninth Circuit was whether McDonald’s is a joint employer, such that it can be held liable for wage and hour violations. Plaintiffs argued that McDonald’s should be liable because it could have prevented some of the contested wage and hour violations, but failed to do so. The district court, however, found that there was no employment relationship between McDonald’s and Haynes’ employees.
In affirming the ruling of the district court, the Ninth Circuit based its decision on the following three definitions of “employer” provided by the California Supreme Court in Martinez v. Combs, 231 P.3d 259 (Cal. 2010) to determine if there was an employment relationship:
- First, the Court found that McDonald’s did not meet the “control” definition of employer, as Haynes, and not McDonald’s, had control over the “wages, hours, or working conditions” of the Plaintiffs;
- Second, the Court held that McDonald’s did not “suffer or permit” the Plaintiffs to work, holding that Plaintiffs’ argument against McDonald’s was misplaced because it asked “whether McDonald’s caused Plaintiffs’ employer to violate wage-and-hour laws by giving the employer bad tools or bad advice,” not whether McDonald’s is one of the Plaintiffs’ employers; and
- Lastly, the Court looked to the California common law definition of employer as it applies to franchises. To find the existence of an employment relationship under this definition, a franchisor must “retain or assume a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.” Patterson v. Domino’s Pizza, LLC, 333 P.3d 727, 738 (Cal. 2014). This inquiry circled back to the first prong of analysis, and the Court concluded that because McDonald’s does not exercise control over the means and manner of work performed at its franchises, it is not an employer under the common law definition.
The Ninth Circuit’s decision in this case demonstrates the extent to which a franchisor may exercise control over the operations of its franchisees while escaping joint employer liability.
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