McDonald's drive-thru
McDonald’s Corp. agreed to settle a class action lawsuit for labor and wage violations allegedly committed by a franchisee. But the company continued to insist it is not a joint employer.

SAN FRANCISCO – McDonald’s Corp. agreed to pay $3.75 million to settle a class action lawsuit for labor and wage violations allegedly committed by a franchisee operating McDonald’s restaurants in the San Francisco Bay Area. But McDonald's insisted the company is not a joint employer of its franchisees.

Under the agreement, the quick-service chain agreed to pay $1.75 million to class members plus court-awarded statutory attorneys’ fees and costs up to a maximum of $2 million. “Payments to class members will be calculated based principally upon the number of weeks each class member worked during the class period (March 12, 2010, to November 5, 2016), with former employees each receiving a separate, additional amount to compensate them on a per capita basis for their waiting time penalties claims,” court documents stated.

McDonald’s reached a deal to settle a wage an hour lawsuit brought on behalf of current and former McDonald’s employees at five McDonald’s restaurants operated by The Edward J. Smith and Valerie S. Smith Family Limited Partnership. The company agreed to the resolution to avoid “the costs and disruption associated with continued litigation,” Terry Hickey, a spokesperson for McDonald's, said in a emailed statement. The initial complaint, which was filed on March 12, 2014, alleged that McDonald’s and Smith LP were jointly liable for a range of California Labor Code violations including:

  • failing to pay all earned wages through September 2013 because of a consistent error in converting employee time punch data to payroll data;
  • failing to pay daily overtime to class members who work overnight shifts as a result of legally incorrect parameters of defendants’ automated timekeeping and payroll system;
  • failing to provide meal periods and rest breaks in the time and manner required by California law;
  • failing to reimburse crew members for the time and money needed to iron and clean their McDonald’s uniforms; and
  • failing to provide wage statements that accurately list all wages earned and that identify McDonald’s as an employer.

The lawsuit also raised the issue “of whether McDonald’s is a joint employer of crew members at Smith’s restaurants or is otherwise liable for the relief requested under California law.” The settlement comes as McDonald’s fights claims that the company is a joint employer. In 2014, the NLRB Office of the General Council ruled that McDonald’s is a joint employer and can be held jointly liable for labor law and wage violations committed by its franchisees. The company argued that the general council is changing the joint employer standard, but supplying vague complaints to support its allegations that McDonald’s violated the standard.

“As this court previously ruled, McDonald’s is not a joint employer of its independent franchisees’ employees.With this agreement, McDonald’s reconfirms that it is not the employer of or responsible for employees of its independent franchisees,” Hickey said. 

Stakeholders in the foodservice industry also argued that holding franchisors liable for the actions of their franchisees completely changes the franchisor-franchisee business model and could lead to less entrepreneurship and job creation in the foodservice industry.

CPT Group, Inc. was appointed claims administrator to prepare a list of class members and mail the notice of settlement. McDonald’s agreed to pay all costs and expenses of printing and mailing the class notices and other costs of administering the settlement, according to court documents.

The case is Ochoa v. McDonald's Corp, US District Court for the Northern District of California, No. 3:14-cv-2098.