944 F.3d 1024
9th Cir.2019Background
- Plaintiffs (≈1,400 workers) were employees of Haynes Family LP franchisees operating eight McDonald’s restaurants in Oakland and San Leandro and sued on behalf of a class alleging California wage-and-hour violations (missed overtime, meal/rest breaks, etc.).
- Haynes hired, set wages and schedules, supervised, disciplined, and paid employees; McDonald’s did not directly hire, set pay, or fire those workers.
- Franchise agreement required Haynes to use McDonald’s POS/ISP systems; McDonald’s provided ISP settings and encouraged use of additional McDonald’s apps for scheduling/timekeeping.
- Plaintiffs allege ISP settings (e.g., assigning hours to shift-start date, 8:59/50:00 overtime thresholds, meal/rest timing) and McDonald’s encouragement prevented proper overtime and break pay; Haynes sometimes lacked ability to change settings.
- Plaintiffs settled class claims against Haynes, continued claims against McDonald’s; district court granted summary judgment for McDonald’s (no joint-employer, ostensible-agency, or negligence liability); Ninth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether McDonald’s is a joint employer under the "control" definition (Martinez) | McDonald’s exerts control through mandated systems, trainings, required manager presence, and brand rules affecting working conditions | McDonald’s control is quality-control and franchisor-brand maintenance, not control over wages/hours/terms | No — McDonald’s lacks the requisite control over wages, hours, or working conditions under Martinez |
| Whether McDonald’s is a joint employer under the "suffer or permit" definition | McDonald’s induced use of ISP and discouraged changes, had ability to prevent wage violations caused by ISP but failed to do so, so it "suffered or permitted" the work | "Suffer or permit" addresses who is effectively the employer (power to hire/fire or prevent work), not merely who caused statutory violations | No — court adopted a narrower "suffer or permit" test: requires power to prevent or terminate employment; factual record did not show McDonald’s had that power |
| Whether McDonald’s is an employer under the common-law (means-and-manner) test | Franchise system and operational controls make McDonald’s a common-law employer of franchise workers | Franchise-level operational rules are about brand/quality control and do not amount to control over manner/means of employment | No — McDonald’s involvement is quality-control; it did not retain general right of control over daily employment matters |
| Whether McDonald’s can be liable under an ostensible-agency theory | Agency (including ostensible) should render McDonald’s liable as an employer for wage/order violations | Wage Order §2(H) refers to entities that actually employ or actually exercise control through an agent; ostensible agency is not encompassed | No — ostensible-agency does not create employer status under Wage Order’s agent language |
| Whether McDonald’s owed a tort duty (negligent supervision) | McDonald’s negligently supervised franchise managers and breached a duty to prevent wage violations | Wage-and-hour statutes provide exclusive remedies; franchisor has no supervisory duty similar to employer | No — negligence fails because statutory remedy is exclusive and plaintiffs cannot prove duty/damages independent of statutory violations |
Key Cases Cited
- Martinez v. Combs, 231 P.3d 259 (Cal. 2010) (defines three alternative ways to be an employer under California wage orders: control, suffer-or-permit, common-law agency)
- Patterson v. Domino’s Pizza, LLC, 333 P.3d 723 (Cal. 2014) (franchisor not vicariously liable unless it retained a general right of control over hiring, supervision, discipline, discharge, and day-to-day workplace behavior)
- Curry v. Equilon Enterprises, LLC, 233 Cal. Rptr. 3d 295 (Ct. App. 2018) (explains the "suffer or permit" definition focuses on defendant’s ability to prevent or terminate the work)
- Dynamex Operations W. v. Superior Court, 416 P.3d 1 (Cal. 2018) (adopted ABC test for employee/independent-contractor distinction; noted but inapplicable here)
- Goonewardene v. ADP, LLC, 434 P.3d 124 (Cal. 2019) (payroll/service provider did not owe tort duty to employee; statutory remedies govern wage claims)
- Futrell v. Payday Cal., Inc., 119 Cal. Rptr. 3d 513 (Ct. App. 2010) (payroll service not a joint employer despite control over pay processing)