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Court Reaffirms McDonald’s Is Not Joint Employer Of Franchisee’s California Employees

The U.S. Court of Appeals for the Ninth Circuit recently reaffirmed its decision in Salazar v. McDonald’s Corp., in which it ruled that McDonald’s cannot be held liable as a joint employer of the employees of its franchisees.

In an amended opinion issued Dec. 11, the Ninth Circuit denied the franchisee’s employees’ petitions both for a panel rehearing and for a rehearing en banc, and affirmed summary judgment in favor of McDonald’s.

The employees had previously argued that McDonald’s was their employer, in part, because it mandated the franchisee to use McDonald’s point of sale and in-store processor (ISP) computer systems and, according to the franchisee’s employees, the ISP system’s settings caused the employees to miss out on breaks and overtime pay. In its amended order, the Ninth Circuit further rejected that argument, holding that “Plaintiffs’ proposed interpretation of ‘suffer or permit to work’ would yield absurd results.” 

As the court explained: “Suppose, in this case, that the ISP system had been designed not by McDonald’s but by an IT specialist and that Haynes’ accountant and lawyer urged Haynes to use it. Under Plaintiffs’ view, by causing wage-and-hour violations, the IT specialist, the accountant, and the lawyer would become joint employers of Haynes’ employees. No California case suggests that this would be a permissible understanding of what it means for a person or entity to ‘employ’ someone.”

The Ninth Circuit reaffirmed its decision that McDonald’s cannot be held liable as a joint employer because it does not retain or exert direct control over franchisees’ employees’ wages, hours, or working conditions, and is not a common law employer since any control McDonald’s asserted pertained to quality control and brand standards, which is both necessary and appropriate for franchisors.

The Ninth Circuit’s Salazar decision is a boon for franchisors, as it confirms the significance of franchisor quality controls and brand standards. The opinion states: “Franchisors like McDonald’s need the freedom to ‘impose[] comprehensive and meticulous standards for marketing [their] trademarked brand and operating [their] franchises in a uniform way.’”

Time will tell whether the franchisee’s employees will appeal the decision or whether California’s AB 5 law, which is set to take effect on Jan. 1, 2020, and is already being challenged in the courts, will have an impact on joint employment liability. For now, franchisors remain free to exert control over their trademarks and brand without being deemed a joint employer.

© 2022 BARNES & THORNBURG LLPNational Law Review, Volume IX, Number 352
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About this Author

Peter J. Wozniak Barnes Thornburg Chicago  Labor Employment
Partner

Pete Wozniak is a vigorous advocate who strives to help his clients navigate issues that can be fraught with challenges as painlessly and efficiently as possible. He is a candid and personable counselor, offering his clients direct advice by leveraging his deep experience performing a broad range of outcome critical functions for complex labor and employment matters.

Pete represents clients across a number of industries, including transportation and logistics, restaurants, retail, manufacturing, and temporary staffing. Handling a number of high profile matters, he identifies the...

312-214-2113
Mark Wallin, Attorney, BT, Chicago, Labor Employment
Of Counsel

In order to provide the best counsel, Mark Wallin believes it is his role to understand his clients’ business needs so he can help them determine what resolution will provide the most benefit. His keen ability to understand his clients’ practical concerns allows him to advise on the best path to successfully resolve issues – whether through traditional litigation or negotiated resolution.

In the course of his practice, Mark has focused on providing the highest-level of service to his clients and building long-term relationships. Specifically, he defends employers in a wide range of...

312-214-4591
Marlén Cortez Morris Franchise Attorney Barnes & Thornburg
Partner

Marlén Cortez Morris represents and advises clients on a wide range of franchise and distribution, labor and employment, and commercial litigation matters in courts and alternative dispute resolution venues and before government agencies across the country.

Marlén litigates complex matters from inception through appeal. Her deep litigation experience includes the enforcement of contract and intellectual property rights, as well as the defense of claims for breach of contract, business torts, violations of franchise registration and relationship laws, state consumer protection...

312-214-8808
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