9th Circuit Reviews Whether McDonald’s Violated Wage Laws

SAN FRANCISCO (CN) – A jury should decide whether to hold McDonald’s liable for violating California’s wage and hour laws, an attorney for a class of employees told a three-judge Ninth Circuit panel on Wednesday.

Attorney Michael Rubin told the judges that McDonald’s was responsible for overtime violations because it all but required its franchisees to install an in-store processing system that miscalculated workers’ wages.

Led by cashiers Guadalupe Salazar, Genoveva Lopez and Judith Zarate, the class sued McDonald’s and franchise owner Bobby Haynes in March 2014, claiming they were denied meal and rest breaks and were not paid for all the hours they worked because the McDonald’s computer system killed overtime from their timecards.

The workers settled with the Haynes family in 2017 for $235,000. A federal judge then sided with McDonald’s, saying in a ruling last year that the fast food giant cannot be held liable for workplace violations because it doesn’t meet the definition of an employer under California’s labor code.

Ruling on McDonald’s motion for summary judgment back in August, U.S. District Judge Richard Seeborg observed that the Haynes Partnership controlled hiring, firing, discipline, wage-setting and the employees’ general working conditions, and that McDonald’s was not a joint employer because it didn’t make direct personnel decisions.

On Wednesday, Rubin said McDonald’s gave franchisees “specific directives” about meal and rest breaks, including dictating that workers cannot leave the stores for breaks.

“That message was communicated to the crew members indirectly through the franchisee and the crew members were not permitted to leave the premises during breaks, which is one of the violations McDonald’s was directly responsible for causing,” Rubin said.

It also made the use of the ISP software mandatory by incentivizing it heavily. Franchisees were told they were not required to use it, but most do because it is cheaper than installing their own computer systems and McDonald’s uses it to track their performance.

“That would be a fact issue for the jury, is it optional or not,” Rubin said, though he noted that McDonald’s franchise agreements say franchisees must strictly adhere to the McDonald’s policies and the systems that it uses to generate audit reports to ensure franchises are meeting their standards.

“An incentive and a requirement are two different things,” Judge Susan Graber said.

Rubin said franchisees were made to feel like that had to use the software, or risk being classified as underperforming.

“Why does someone’s belief make a difference if their belief is mistaken? What if the agreement says we will offer you a software package but you don’t need to use it, and someone testified ‘I thought I had to use it.’ Why does the belief make any difference at all?” Graber asked.

“That’s evidence from which a jury could decide that McDonald’s intended for them to use it,” Rubin said. “It is McDonald’s intent to dictate certain results. The fact that the franchisee reasonably believed that it was a directive is evidence from which a reasonable inference could be drawn that it was a requirement.”

But McDonald’s attorney Pratik Shah said there’s a big difference between economic incentives and contractual requirements.

“Yes they had a good economic reason to use the ISP because it was offered, why pay for something else? But that is night and day different from employer control. They are offering resources that the franchisee has adopted,” Shah said.

“But they’re offering resources that sort of lead the franchisee down the garden path of violating the wage and hour laws in the state of California,” Graber said. “Can McDonald’s wash its hands of liability for that?”

Shah said pressure to use a certain type of software still doesn’t establish that McDonald’s had enough control over working conditions in the Haynes’ stores.

“Economic leverage as opposed to contractual requirement and control is not enough,” he said.

The judges took the case under submission.

 

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