Federal Court Issues Key Joint Employer Ruling

October 04, 2019

In an important development in the continuing saga of joint employer status, the Ninth Circuit ruled that McDonald's was not liable for wage and hour violations committed by a California franchisee.

A three-judge panel upheld the district court's decision that McDonald's did not exercise the requisite amount of control over the franchise workers to be deemed a joint employer.  The case stems from a class action lawsuit involving nearly 1,500 workers at eight different franchises in California, which alleged that McDonald's owed a duty of care as a joint employer and violated that duty of care by not exercising proper supervision to prevent the wage and hour violations, including miscalculated pay and restrictions on meal and rest breaks.

The Ninth Circuit found that McDonald's exercise of control over its franchises was generally limited to "quality control" and "maintenance of brand standards," and did not extend into control over "wages, hours, or working conditions."

Outlook:  The standard for finding joint employer status remains a hot topic in labor and employment law, with proposed rules on the books at both the Department of Labor and the National Labor Relations Board.  It is possible that the Ninth Circuit will send some of the issues in the case to the California Supreme Court, which could take a less employer-friendly stance on joint employer liability and throw yet another wrench into the ongoing fight over the proper standard for determining joint employer status.