On October 1, 2019, the federal Ninth Circuit Court of Appeals ruled in Salazar v. McDonalds Corp. that McDonald’s was not a “joint employer” of 1,400 employees who worked at various Bay Area McDonald’s restaurants owned and operated by the Haynes Family Limited Partnership (“Haynes”). As a result, only Haynes – and not McDonald’s Corp. – could be held liable for failing to pay overtime and provide meal and rest periods to the employees.
The “Level of Control” is Key
In reaching this decision, the Ninth Circuit carefully examined the definition of “employer” under California Wage Order #5 and under previous court decisions, mainly Martinez v. Combs and Patterson v. Domino’s Pizza. The Court held that there was no evidence that McDonald’s Corp. had the requisite level of control over plaintiff’s employment to justify a finding that McDonald’s Corp. was a joint employer along with Haynes. Two facts were critical to the Court’s ruling: that, even though McDonald’s Corp. exercised some control over its franchisee’s branding and quality, McDonald’s Corp. had no control over (1) the means and methods of the employee’s work, and (2) the hiring or firing of the employees. Thus, McDonald’s Corp. was not a joint employer.
The decision in Salazar v. McDonald’s Corp. was 2-1. The dissenting judge wrote a strong dissent and argued McDonald’s Corp. could be considered a joint employer because (1) McDonald’s Corp. required its franchisee to use its software to open and close each restaurant every day, (2) that the settings in that software, which the franchisee had limited ability to modify, contributed to the alleged wage-and-hour violations, and (3) McDonald’s Corp. was aware that work was occurring under unlawful conditions but failed to prevent the violations.
Likely En Banc Review Coming
Although Salazar v. McDonald’s Corp. is a big “win” for franchisors in California, this decision is almost certainly not the end of the story. We expect the plaintiffs will file a petition for an en banc review. This review, if it happens, will produce a final, dispositive Court decision from the entire Ninth Circuit (and not just 3 judges). Stay tuned!
You can read the Court’s opinion in Salazar v. McDonald’s Corp. here.