California federal judge grants class action status to employees of a McDonald’s franchise in their lawsuit against McDonald’s
A July 7 decision by a California federal judge has granted class action status to a group of employees of a McDonald’s franchise in their claims against McDonald’s for alleged employment law violations. The case Ochoa et al. c. McDonald’s Corp., et al. centers on whether McDonald’s Corp. is liable for various labor law violations committed by its franchisee, including the failure to pay overtime wages and provide required breaks, under the theory that the franchisee is the “ostensible agent” of McDonald’s Corp. Ostensible agency exists where: (i) the person dealing with the agent does so with reasonable belief of the agent’s authority; (ii) that belief is generated by some act or neglect of the principal sought to be charged; and (iii) the relying party is not negligent. The ruling paves the way for the inclusion of up to 400 current and former employees of the franchisee. The court had previously held that McDonald’s was not directly liable as a joint employer for the franchisee’s violations.
In his opinion, Judge James Donato of the United States District Court for the Northern District of California dismissed McDonald Corp.’s argument that the allegations of ostensible agency are incapable of being resolved on a classwide basis. In support of its ruling, the court noted that the plaintiffs presented substantial and undisputed evidence that the putative class of plaintiffs was exposed to common conduct demonstrating ostensible agency, including the fact that the plaintiffs “were required to wear McDonald’s uniforms, package food in McDonald’s boxes, received paystubs, orientation material, shift schedules and punch time reports all marked with McDonald’s name and logo, and in most cases applied for a job through a McDonald’s website.” The court noted that the above facts “are shared in common across the proposed class and make classwide adjudication of ostensible agency against McDonald’s a suitable and appropriate procedure.”
We will continue to follow this case as it continues to the next stage. However, it should serve as a reminder to franchisors of the importance of maintaining the independent contractor model and ensuring that the franchisee maintains control over the franchisee’s traditional responsibilities as an employer, including the hiring and training of its employees. Additionally, any letterhead, forms, cards, pay stubs, and other such identification used by a franchisee should prominently note that the franchiseis independently owned and operated.Back