A U.S. District Court in Northern California ruled last Friday that McDonald's Corp. (MCD) does not control wages paid to workers at its franchised stores and is not liable for violations of the state's labor laws. The judge in the case, Richard Seeborg, granted the company's petition for summary judgment finding that the workers did not support their argument that the labor code's definition of an employer extends to companies that "ostensibly" control wages through an agent.
The ruling ends a case brought in 2014 against a Northern California franchisee of McDonald's, the parent company's U.S. operating company, and McDonald's itself. The suit was filed on behalf of more than 1,200 current and former employees in McDonald's Oakland and San Leandro franchise stores operated by Bobby O. Haynes Sr. and Carol R. Haynes Family L.P.
Last July in a different case, a different judge in the same District Court granted McDonald's bid for summary judgment on the company's direct liability for specific labor law violations but denied it on the issue of "ostensible" agency. The parties concluded that lawsuit in November when McDonald's agreed to pay a $3.75 million settlement, $1.75 million in back pay and $2 million in legal fees. The franchisees in that case — Smith Family L.P. — had already paid $700,000 to settle claims against it.
One argument that workers have used is that by setting franchisees' costs for supplies, McDonald's is de facto setting the wages the franchisees pay to workers. In an editorial published at the time of the July 2016 decision, The New York Times wrote:
The district judge in California has now given lawyers for the McDonald's employees the chance to prove in court what should be evident: that McDonald's is responsible for ensuring that pay is fair and adequate and, as such, must be accountable when workers in its restaurants are stiffed.
McDonald's has been the target of a coalition of fast-food and other low-paid workers who have been pressing for a minimum hourly wage of $15. The movement, now called the Fight for $15, began in 2012 with a demonstration outside McDonald's locations in New York City.
A final determination is probably still years off, but the losers in last week's decision already have announced plans to appeal the summary judgment to the Ninth Circuit Court of Appeals.