November 02, 2016

While McDonald's Corp.'s decision to pay a franchisee's workers $3.75 million to settle a wage-and-hour class action won't affect the fast-food giant's joint employer case before the National Labor Relations Board, experts say the deal could cause other companies to think twice about exerting control over a franchisee's operations.

Late last week, a group of workers told a California federal court that they had reached the deal with the fast-food giant to end a wage-and-hour suit. The proposed settlement, which still requires court approval, would end a lawsuit by plaintiff Stephanie Ochoa and other employees of The Edward J. Smith and Valerie S. Smith Family LP, an entity that owns and operates five McDonald's franchise locations in the San Francisco Bay Area. The deal also requires McDonald’s to make optional training available to the entity's workers on the use of McDonald's scheduling and timekeeping software and techniques.

Joseph M. Sellers, Chair of Cohen Milstein's Civil Rights & Employment practice and counsel for the plaintiffs told Law360 that he believes the deal is the first time McDonald's entered into an agreement with a class of workers who worked for a franchisee. Sellers noted that McDonald's agreed to pay more as part of the settlement than his clients' economic losses as well as implement a training program, which should help prevent similar problems with that franchisee in the future. "I think of [the settlement] as historic. McDonald's has repeatedly denied responsibility for the violation of workplace rules and laws that occur in a franchise restaurant," Sellers said. "We felt strongly about the merits of the case, but when we could receive more than [the workers] had lost, it was very hard for my clients to turn [that] down."

McDonald's had vowed to challenge Judge Donato's class certification ruling in the Ninth Circuit earlier this year. Sellers pointed out that a trial in the case had been slated for December and that the plaintiffs were prepared to argue that McDonald's was a joint employer under the ostensible agency theory. "The settlement reflects the recognition that [McDonald's] bore a significant risk if it went to trial," Sellers said. "We would have been able to show legally that [McDonald's] bore a responsibility toward the employees."

The full Law360 article can be read here