McDonald's Settles Wage Theft Lawsuit for $3.75 Million

Nah, nah, nah, nah, nah, Not Lovin' It!

Nah, nah, nah, nah, nah, Not Lovin' It!

McDonald’s still insists it isn’t a joint employer of workers in its franchise restaurants. But despite its arguments to the contrary, the company is paying out millions to settle a lawsuit based on just such a claim. This past week, lawyers representing about 800 employees at five restaurants owned by a single franchisee announced McDonald's had agreed to pay $1.75 million in back pay and damages and $2 million in legal fees.

The lawsuit was filed in 2014. In it, the plaintiffs claimed McDonald’s and its franchisee, Smith Family LP, violated California law by failing to pay overtime, keep accurate pay records and reimburse workers for time spent cleaning uniforms. The franchisee previously settled the claims against it for $700,000.

The legal issue in these franchise vs. joint employer cases is in a word: control. The more control a franchiser like McDonald's exercises over its franchisees (the individual owners of its stores), the more likely it will be found to be a joint employer of the franchisee's employees. And in this case, it appears that McDonald's exercises a great deal of control over its individual franchise owners. So much control, the plaintiffs argued, that the corporate McDonald's should not be able to shield itself from liability when one of its franchisee owners breaks the law and steals wages from rank and file workers. 

While this case is surely a good result for the employees involved, whether it signals a trend in the law more generally is still an open question. Only time will tell.