Salazar v. McDonald's Corp. - Ninth Circuit Court of Appeals
Facts: A class action was filed by McDonald's workers that worked at one of the company's franchises. The 1,400 workers that were part of the class (hereinafter referred to as "the claimants") sued McDonald's and the Haynes Family Limited Partnership ("Haynes") (which operated eight McDonald's franchises) claiming that they were denied overtime pay, meal and rest breaks, and other benefits in violation of the California Labor Code. The class alleged that McDonald's and Haynes were joint employers, therefore both were liable for these alleged violations.
The evidence established that Haynes selected, interviewed, and hired its employees for each franchise location. Haynes was responsible for training its new employees and setting their wages (which were paid by Hanyes.) Haynes also set employee schedules and monitored their time entry. There was no evidence that McDonald's had any role in these activities or any control over the termination of the workers. McDonald's did require Haynes to use its point of sale and in store processor computer system to open and close each franchise location. (The in store processor was alleged to improperly credit workers with overtime though.) Mangers of Haynes took various courses at McDonald's and then trained other employees on topics such as meal and rest break policies. McDonald's also required the workers to wear standard uniforms and keep those uniforms "clean and neat."
The claimants settled with Haynes after suit was filed, but McDonald's moved for summary judgment on the grounds that it was not a joint employer of workers at franchises. The district court granted summary judgment in favor of McDonald's and the claimants appealed.
Holding: For those unfamiliar with California law, California Wage Order No. 5-2001, section 2(H) states that an "employer" is one "who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person." The California Supreme Court has previously interpreted Wage Order No. 5-2001 to provide three alternative definitions for what it means for a person or entity to "employ[]" someone: "(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law relationship."
The "Control" Factor
The Court of Appeals agreed with the district court's finding that McDonald's was not an employer under the "control" definition, which requires "control over the wages, hours, or working conditions." While McDonald's did assert control over franchisees' workers, the Court held that was geared toward quality control rather than control over wages, hours, or working conditions.
The "Suffer or Permit" Factor
As for this factor, the claimants argued that McDonald's was a joint employer because it induced Haynes to use the in store processor system and discouraged any changes to be made to the system. As well, the claimants suggested that McDonald's had the ability to remedy issues with the system to ensure it would comply with California wage and hour laws, yet failed to do so.
The Court of Appeals pointed out, however, that the question boiled down to whether McDonald's was an employer of the claimants rather than a question of whether McDonald's caused Haynes to violate wage and hour laws by providing a bad processor or bad advice. Relying upon a string of caselaw, the Court made note of a 2010 California Supreme Court case, Martinez v. Combs, which found that because a third party employer "had the exclusive power to hire and fire [the] workers, to set their wages and hours, and to tell them when and where to report to work." a joint employer relationship did not exist.
In regard to a claim the the California Supreme Court's 2018 Dynamex v. Superior Court case applied, the Court noted it had no bearing as Dynamex dealt with a new test for determining whether a worker was an independent contractor or employee, rather than determining joint employer status.
The "Common Law" Factor
California common law has established "[t]he principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired." Again, relying on caselaw, the Court pointed out that the "means and manner" test generally used cannot stand for the proposition that a comprehensive [franchise] system along constitutes the "control" needed to support a vicarious liability claim. As noted in the Court's earlier analysis, McDonald's exercise of control over the means and manner of work performed at its franchises was geared specifically toward quality control and maintenance of brand standards. While McDonald's might have been aware that Haynes was violating California wage and hour law, there was no evidence that McDonald's had the requisite level of control over the employment of claimants to render it a joint employer.
Judgment: The Ninth Circuit Court of Appeals affirmed the granting of summary judgment in favor of McDonald's, finding that the class action could not establish that McDonald's was a joint employer, in accordance with California wage and hour law.
The Takeaway: For a Ninth Circuit Court of Appeals case, this was a rather short opinion. Notwithstanding that, the Court got to the point and did a good job walking through the three different factors to establish that there was simply insufficient evidence to establish McDonald's as a joint employer with Haynes. I do call attention to the Court's brief, but relevant, discussion about the the recent Dynamex case did not apply here.
Majority Opinion Judge: Judge Graber
Date: October 1, 2019
Opinion: http://cdn.ca9.uscourts.gov/datastore/opinions/2019/10/01/17-15673.pdf
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