A federal court rules the fast-food chain doesn't control wages paid to workers by franchisees.

SAN FRANCISCO – A US District Court judge ruled that McDonald’s Corp. does not set wages paid to employees by franchisees and is not liable for violations of California labor laws. The ruling sets the stage for an appeal to the Ninth Circuit Court of Appeals.

The lawsuit was filed in 2014 on behalf of 1,200 current and former employees of McDonald’s stores owned and operated by the Bobby O. Haynes Sr. and Carol R. Haynes Family LP. Richard Seeborg, the judge in the case, granted McDonald’s motion for summary judgment and ruled that the plaintiffs could not show that McDonald’s met the state’s definition of an employer. The court also “…rejected the argument that the franchise agreement between McDonald’s and Haynes, the franchise owner of the restaurants involved, established a generic right to control the terms and conditions of plaintiffs’ employment.”

McDonald’s settled a class action lawsuit for labor and wage violations allegedly committed by The Edward J. Smith and Valerie S. Smith Family LP in October 2016. 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. Despite the settlement, McDonald’s insisted the company is not a joint employer with its franchisees.

In 2014, the Office of the General Council of the National Labor Relations Board Office ruled that McDonald’s is a joint employer and can be held jointly liable for labor law and wage violations committed by its franchisees. Stakeholders in the foodservice industry have 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.