Franchisor Agrees to Settle Dispute Between Franchisee and Workers

Franchisor Agrees to Settle Dispute Between Franchisee and Workers


McDonald’s Corp. has agreed to pay $3.75 million to settle a 2014 class action lawsuit filed by workers alleging wage and hour violations at one of its franchises in California, even though the company issued a statement after the proposed settlement that said the company wasn’t a joint employer of the franchise workers.

A company spokesperson said that McDonald’s agreed to the proposed settlement “to avoid the costs and disruption associated with continued litigation.”

The company would be liable for labor violations by its franchisees if McDonald’s was considered a joint employer of the workers. However, a federal district court had previously ruled that McDonald’s didn’t jointly employ the workers because it doesn’t retain or exert direct or indirect control over their hiring, firing, wages, or working conditions.

The court acknowledged though that a jury might conclude that McDonald’s was a joint employer of the workers because managers at the franchise were subject to training by McDonald’s and interacted regularly with McDonald’s consultants. They also wore McDonald’s uniforms, and referred to themselves as “working for McDonald’s.”

The workers alleged that the franchisee failed to pay overtime, keep accurate pay records, or reimburse workers for time spent cleaning uniforms.

The proposed settlement must still be approved by a federal judge. (Ochoa v. McDonald’s Corp., DC CA, Dkt. No. 3:14-cv-2098, 10/28/16)