Ninth Circuit Finds McDonald’s is Not a Joint Employer

The lawyers at SFMS are very experienced with handling class actions concerning wage and hour statutes.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.

The legal team at SFMS has substantial experience litigating class action and employment matters. If you have any questions regarding this subject or this posting, please contact John Roberts (jroberts@sfmslaw.com) or Alec Berin (aberin@sfmslaw.com). We can also be reached toll-free at 877-891-9880.

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 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 contact us at www.sfmslaw.com.

A Message to Our Clients About Coronavirus COVID-19:
PLEASE READ »

A Message to Our Clients About Coronavirus COVID-19

At Shepherd, Finkelman, Miller & Shah, LLP, we view the safety and well-being of our clients, staff and business partners as our highest priority.

The situation regarding the COVID-19 virus is continually changing, and we are following all recommended guidelines to stay healthy. As a result, our lawyers and staff are working remotely in accordance with the CDC's recommendations. We continue to work for all of our clients and are happy to arrange for phone or video consultations. We are also able to exchange documents via secure drives or email.

Please contact us online or call 866-540-5505 with any questions.

Thank you and take care.