Ochoa v. McDonald's Corp.
133 F. Supp. 3d 1228
N.D. Cal.2015Background
- Putative class action by four current/former employees of Smith-operated McDonald’s franchises in Oakland/Richmond alleging multiple California Labor Code violations and a negligence claim against McDonald’s defendants and Smith.
- Central factual allegations include: ISP/POS timekeeping software assigned hours to shift-start date (affecting daily overtime), manual time conversion errors by franchisee when submitting payroll, failure to provide meal/rest breaks, and improper wage statements/uniform reimbursement issues.
- McDonald’s required franchisees to use certain proprietary systems (ISP, NewPOS) and optional tools (R2D2), provided training recommendations, consultants, mystery shoppers, and exercised contractual leverage (rewrite/termination, property/lease arrangements), but Smith retained hiring, firing, pay, scheduling, and direct supervision authority.
- McDonald’s moved for summary judgment that it was not a joint employer and not negligent; plaintiffs conceded McDonald’s California should be dismissed but opposed other relief and asserted ostensible agency/joint-employer theories.
- The court granted summary judgment that McDonald’s is not a direct joint employer and granted summary judgment on negligence; it denied summary judgment on ostensible agency (permitting a jury determination on that theory).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether McDonald’s is a joint employer under Martinez (exercise control) | McDonald’s exerts substantial control via mandatory systems, standards, training, consultants, property/lease control, and economic leverage | Smith (franchisee) alone made hiring, firing, pay, scheduling, and day-to-day supervision decisions; franchisor influence ≠ direct control | McDonald’s is not a direct joint employer under exercise-control prong (SJ for McDonald’s) |
| Whether McDonald’s is a joint employer under Martinez (suffer or permit to work) | Monitoring and knowledge of violations (via R2D2, consultants) meant McDonald’s permitted unlawful work | Ability to pressure franchisee economically does not equal power to prevent or cause work; no authority to hire/fire or set wages | Not a joint employer under suffer-or-permit (SJ for McDonald’s) |
| Whether McDonald’s is a joint employer under common-law "engage" (Patterson standard) | McDonald’s retained/control over operational matters that implicate hiring, discipline, training, and workplace conditions | Patterson requires franchisor right to control hiring, firing, supervision; McDonald’s lacks those direct rights here | No direct common-law employer liability (SJ for McDonald’s) |
| Whether Smith was McDonald’s ostensible agent such that McDonald’s is liable | Employees reasonably believed McDonald’s was their employer (logos, uniforms, paystubs, hiring via McDonald’s site, orientation materials) and that belief was generated by McDonald’s acts/branding | McDonald’s argues lack of direct control and that franchisee is employer; did not successfully defeat ostensible-agency evidence at summary judgment | Genuine dispute exists on ostensible agency; SJ denied as to that theory (trial required) |
| Whether plaintiffs’ negligence claim survives | Negligence duplicates statutory wage-and-hour claims and seeks extra-statutory relief; but claims also rest on franchisor conduct such as ISP setup/training | McDonald’s contends negligence is preempted by the statutory remedial scheme (new right–exclusive remedy doctrine) | Negligence barred by the exclusive remedy doctrine; SJ granted for McDonald’s |
Key Cases Cited
- Martinez v. Combs, 49 Cal.4th 35 (2010) (defines “employer” under IWC wage orders: exercise control, suffer or permit, or engage)
- Patterson v. Domino’s Pizza, LLC, 60 Cal.4th 474 (2014) (franchisor liability requires retention/assumption of general right to control hiring, supervision, discipline)
- Futrell v. Payday California, Inc., 190 Cal.App.4th 1419 (2010) (control over wages means authority to set rate of pay; lack of hiring/firing/supervision undermines employer status)
- Aleksick v. 7-Eleven, Inc., 205 Cal.App.4th 1176 (2012) (franchisor-mandated payroll/payroll services do not alone create joint-employer liability)
- Rojo v. Kliger, 52 Cal.3d 65 (1990) (new-right exclusive remedy doctrine: statutory remedial scheme can displace common-law claims)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary judgment burden-shifting framework)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (materiality and genuine dispute standards for summary judgment)