9th Circuit: McDonald’s Was Not Joint Employer of Franchises

Allen Smith, J.D. By Allen Smith, J.D. October 3, 2019
9th Circuit: McDonald’s Was Not Joint Employer of Franchises

​The 9th U.S. Circuit Court of Appeals has held that McDonald's Corp. was not a joint employer of franchises in the San Francisco Bay Area and so could not be held liable for alleged wage and hour violations under California law.

The restaurants' workers had sued the parent corporation, claiming they were denied overtime premiums and meal and rest breaks in violation of the California Labor Code. The 9th Circuit ruled that McDonald's was not a joint employer of the franchise employees because it did not exercise over the workers' wages, hours or working conditions.

We've gathered articles on the joint employer definition from SHRM Online and other trusted media outlets.

Decision May Be Appealed

A three-judge panel of the 9th Circuit reached the decision, rather than the full court. It's likely that the plaintiffs will ask for reconsideration by the panel or the entire 9th Circuit, according to their attorney, Michael Rubin of Altshuler Berzon in San Francisco.  The 9th Circuit should send the case to the California Supreme Court to decide the scope of California's employment law protections, he said.


DOL Proposes Narrow 'Joint Employer' Definition

Earlier this year, the U.S. Department of Labor proposed narrowing the definition of "joint employer" under the Fair Labor Standards Act. In 2017, the department withdrew an interpretation that had been issued by former President Barack Obama's administration that broadly defined "joint employer." The proposed rule's test is a modified version of a standard that some federal courts already apply, said Marty Heller, an attorney with Fisher Phillips in Atlanta.

(SHRM Online)

NLRB Hones the Definition Under the NLRA

The National Labor Relations Board (NLRB) is in the process of narrowing the definition of "joint employer" under the National Labor Relations Act (NLRA). The definition determines whether franchisors and contractors are liable for the actions of franchisees and subcontractors, and whom employees may picket. The proposed rule says that to be a joint employer, a franchisor or contractor must directly control another entity, such as by recommending that a franchisee or subcontractor fire employees. Under the current standard, indirect control—reserving the right to suggest that another entity fire someone but not exercising that right—would be enough to show a franchisor or contractor is a joint employer.

(SHRM Online)

Congressional Action Stalls

Congress passed a bill on Nov. 7, 2017, that would have required a business to exercise direct control of another entity to be considered a joint employer. The Save Local Business Act would have legislatively overturned the NLRB's 2015 Browning-Ferris Industries decision, which ruled that entities may be joint employers even if one exercises only indirect control over the other. However, the Senate did not pass the legislation.

(SHRM Online)

[SHRM members-only toolkit: Complying with U.S. Labor Relations Laws in Nonunion Settings]

D.C. Circuit Has Upheld Indirect Control Standard

At least one appeals court, the D.C. Circuit, has upheld the indirect control standard. On Dec. 28, 2018, the D.C. Circuit approved the Obama administration's broad definition of joint employer. In its decision, the appeals court cautioned the NLRB about rule-making. "The board's rule-making … must color within the common-law lines identified by the judiciary, the appeals court said.

(SHRM Online)



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