McDonald’s Corp. has settled a class-action lawsuit on behalf of 800 San Francisco-area restaurant workers, the first of its kind for the fast food giant, which has been in a legal battle with the government and labor organizations over whether it is a “joint employer” with its franchisees, most of which are privately owned small businesses.
The settlement was an apparent effort to avoid a court ruling on the joint employer issue. According to the Friday court filing, the company agreed to provide $1.75 million in back pay and $2 million in legal fees to the workers, all of whom were employed at five restaurants owned by a single franchisee called Smith Family LP.
The fanchisee was sued in 2014 for failing to pay overtime and keep accurate work records. It settled with the workers last year, but they continued to press their case against the larger corporation on the grounds that McDonald’s Corp. also was their employer.
McDonald’s spokeswoman Terri Hickey told Reuters the settlement did not mean the company was conceding it was a joint employer. “We entered into this mutually acceptable resolution to avoid the costs and disruption associated with continued litigation,” she said.
The announcement is likely to lead to copycat suits, however. McDonald’s has been the target of an extensive campaign by the Service Employees International Union, which has sought to unionize the company’s workers. A legal determination that it was a joint employer with its franchisees would make the union’s effort much easier. The corporation’s franchisees employ an estimated 750,000 people.
“Joint employer” is a legal term meaning that two companies are so intertwined that both can be legally responsible for their workers. Until recently, the legal standard required one company to have “direct control” over another’s workers for that to apply. In 2014, the National Labor Relations Board, the main federal labor law enforcement agency, moved to broaden the definition to include “indirect control” as well, a potentially vast expansion of legal liability for businesses since that could apply to franchising and subcontracting.
The same year, the labor board filed a major unfair labor practices complaint against McDonald’s Corp., saying it was a joint employer with its franchisees.
“The sole reason why our agency is involved in the McDonald’s situation is because there is a national campaign that’s called the ‘Fight for $15’ that is being run by a fast-food workers alliance that is seeking to raise wages in the fast food industry to $15 a hour,” labor board General Counsel Richard Griffin said at an American Bar Association event last year. Griffin is a former top lawyer for the International Union of Operating Engineers.
Business groups have complained bitterly, calling the new legal standard unfair since it makes them potentially liable for actions by other employers the parent company may not even be aware of. Republican lawmakers have agreed and pushed legislation to block the labor board.
