Franchising Industry Rejoices Over Federal Appeals Court Decision Regarding McDonald’s as a Joint Employer

In a recent development, the federal appeals court held that McDonald’s could not be held liable as a joint employer of franchise location employees. The case (Salazar v. McDonald’s Corp.) involves close to 1,400 workers employed by one of McDonald’s franchise locations. The lawsuit alleges several wage and hour violations under the California Labor Code as well as negligence and relief under the California Private Attorneys General Act (PAGA).

Previously, the class settled with the franchise, but they sought to take the case further by holding McDonald’s responsible as the joint employer. The District Court disagreed, finding that McDonald’s was not a joint employer of the employees hired by a franchise. The court rejected the employees’ theory of joint liability for violations. The employees in the case appealed, but the Ninth Circuit court affirmed.  

What is the Law on Joint Employment Liability in California?

The Ninth Circuit court based its findings regarding joint-employer status on the meaning of “employer” as defined by California law.

An employer, as defined by California Wage Order No. 5-20001, Section 2(H), is someone who “directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.”

The definition of “employer” received further clarity through the findings of the California Supreme Court in the 2010 Martinez v. Combs decision. In this case, “employ” was further defined as:

·      the act of exercising control over the wages, hours or working conditions

·      to “suffer or permit” someone to work

·      to engage, creating a common-law relationship

The Ninth Circuit court explained that, in the context of franchising, the California Supreme Court held that a franchisor becomes potentially liable for the actions of the franchisee’s employees only if the franchisor retains or assumes an overall right of control over various factors: hiring, direction, supervision, termination, discipline, and other everyday elements of the workplace activities of franchise employees (2014 Patterson v. Domino’s Pizza, LLC). 

Using these definitions, the Ninth Circuit upheld the District Court’s decision that McDonald’s is not liable as a joint employer:

·      McDonald’s does not retain “control” over franchise employee wages, hours, or working conditions.

·      McDonald’s does not “suffer or permit” franchise employees to work.

·      McDonald’s is not a common-law employer since the common-law test focuses on whether an employer has the right to control how the goals of the company are met by employee job duties.

The Salazar case is an important one for franchisors, franchisees, and the entire franchising industry. The Ninth Circuit court recognized that franchisor could apply control over their brand and their trademark without being held responsible as a joint employer. 

If you have questions about California labor law violations, please get in touch with Blumenthal Nordrehaug Bhowmik DeBlouw LLP. Experienced employment law attorneys are ready to assist you in any one of various law firm offices located in San Diego, San Francisco, Sacramento, Los Angeles, Riverside, and Chicago.