McDonald’s has settled a case with workers who said they were subject to labor violations at franchisee-owned stores.
This is the first time the corporation has settled a case with employees.
The company agreed to pay $3.75 million to workers who alleged that several San Francisco Bay Area McDonald’s stores miscalculated their pay, denied them overtime, and did not compensate them for cleaning their uniforms, according to documents filed Friday in a U.S. District Court in San Francisco.
The Bay Area workers argued that they reasonably believed they were employed by McDonald’s, which stamped its logo on their paychecks, uniforms and orientation materials. U.S. District Court Judge James Donato thought that argument was rational enough to be heard by a jury, which is apparently something McDonald’s wanted to avoid.
A spokeswoman for McDonald’s, said in an email that a California court had already determined that the company was not a joint employer. “We entered into this mutually acceptable resolution to avoid the costs and disruption associated with continued litigation,” the spokeswoman wrote.
If approved by a federal judge, $1.75 million of the settlement will go to more than 800 workers and $2 million will go to lawyers for the plaintiffs. The franchisee had already settled with the workers for about $700,000.
The same plaintiffs’ lawyers have already argued in another case, also in San Francisco, that a group of 1,200 workers at McDonald’s stores owned by a franchisee can sue the company on the theory that they rationally believed the company was their employer.
A federal judge is expected to rule on the demand for class-action status in December.
McDonald’s operates under a franchise business model, so a good amount of McDonald’s restaurants are not actually owned by McDonald’s USA, the franchisor, but by independent franchisees. Lots of fast food chains operate under a similar model. The franchise model has been viewed as a way to guard against liability for employment law claims due to the fact that the franchisee is ultimately responsible for employment matters. While this has been found true in many employment law cases, there has also been an exception in certain situations where the franchisor and franchisee are viewed as joint employers, which is what is being brought up in this particular suit. To be a joint employer, the franchisor would have to have been directly involved in some way in the day-to-day operations of the franchisee.