McDonald’s Agrees to Pay First Settlement to Franchise Workers Worth $3.75 Million

To settle a lawsuit alleging that it was accountable for labor law violations, McDonald’s Corp has agreed to pay $3.75 million to a California franchisee. This signifies what lawyers said was the first time the company has cleared legal claims by a group of U.S. employees at one of its franchises.

In a filing in U.S. district court in San Francisco, lawyers representing said

On Friday, lawyers said in a filing in US district court in San Franciso that Illinois-based McDonald’s would compensate the workers $1.75 million in back pay and damages and $2 million in legal fees. The lawyers represent around 800 workers at five restaurants held by a single franchisee.

The settlement occurs as the fastfood chain company copes with contentions before two U.S. agencies. The arguments are based on allegations that it is a “joint employer” of workers at franchise restaurants. This designation could make McDonald’s responsible for legal violations by franchisees. Further, it would compel  the company to deal with employees who unionize. In any way, a federal judge must approve the settlement.

The company is not a joint employer of franchise workers, McDonald’s spokeswoman Terri Hickey said on Monday.

She said that the company entered into this mutually suitable resolution to avoid the disruption and costs associated with a prolonged legal action.

The 2014 lawsuit asserted McDonald’s and Smith Family LP, the franchisee, disregarded California law by neglecting to pay overtime. Further, they failed to keep accurate pay records and did not reimburse workers for time spent cleaning uniforms. The franchisee earlier reconciled the claims for $700,000.

Last year, a judge declared that McDonald’s was not the complainants’ joint employer under state and federal laws. However, he said the company could still be deemed liable if the employees believed McDonald’s was their employer.

Lawyers for the workers, in Friday’s court filing, said the settlement was the first for McDonald’s in a class action case passed by franchise employees.

According to the court filing, the deal would also oblige McDonald’s to educate the franchisee, Smith Family, on the use of corporate software. These programs were designed to guarantee accordance with California’s distinctively stringent employment laws.

More legal woes

Meanwhile, McDonald’s is at the center of legal proceedings at the National Labor Relations Board. The trial could resolve whether the company is a joint employer under the federal law presiding union organizing.

Moreover, a union-backed group earlier this month said it had filed sexual harassment grievances against McDonald’s. The cases were filed with a federal agency on behalf of 15 workers. Most of the employees worked at franchise restaurants.

 

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