Whether or not two or more employers are joint employers, thereby making them liable for each other’s violations of the law, has been a very hot topic of late. The NLRB, in Browning-Ferris, found a staffing agency to be a joint employer with its client Browning-Ferris, because Browning-Ferris had the right to exercise control the staffing agency’s employees. That case has now been affirmed in part by the D.C. Circuit Court of Appeals and remanded to the NLRB for further identification of the facts for application of the indirect control factor so a final outcome is not known. The NLRB’s case against McDonald’s Corp., alleging it is a joint employer and therefore liable for alleged labor law violations by franchisees, is pending. Then, in 2018 the NLRB published proposed rules on the definition of joint employer, rather than solely relying on caselaw. A final rule has not been published and it is expected that the NLRB will make some changes to the proposed rule in light of the 9th Circuit case. It’s a mess!
Now the 9th Circuit Court of Appeals has issued an opinion to add to the mix. In Salazar, Lopez and Zarate et al. v. McDonald’s Corp., a class of over 1,500 employees who worked at McDonald’s franchise branded restaurants in the San Francisco Bay Area, sued the franchisee and McDonald’s as franchisor, claiming that they were not given overtime premiums, meal and rest breaks. They argued that McDonald’s and the franchisee were joint employers and therefore could both be held liable for the franchisee’s wage violations. The plaintiffs settled with the franchisee but continued to pursue McDonald’s Corp.
The overtime, meal and rest break problems arose out of timekeeping software that McDonald’s Corp. made available to franchisees. The issue was whether McDonald’s level of control over the franchisee’s employees made McDonald’s a joint employer.
The 9th Circuit held that McDonald’s Corp. is not liable for any wage and hour violations that may have been committed by the California franchisee. The Court said that any direct control that McDonald’s Corp. may have exercised over franchisee employees “is geared toward quality control” but does not give McDonald’s “a general right of control” over the daily operations of franchise locations.
What Does this Mean for Employers Who Use Staffing Agencies?
This most recent decision is based on California law. However, it is significant that a federal Court of Appeals is distinguishing a franchisor’s efforts for the quality control of the franchisee’s product, from control over employee working conditions. Employers who use staffing agencies to employ all or a portion of their workforce need to keep an eye on developments in this ever-changing area of the law. The definition of joint employer is in flux and differs depending on the statute which is alleged to have been violated. Employers wishing to avoid being deemed to be a joint employer should continue to ensure that their contracts with staffing agencies provide that only the staffing agencies have direct control over their employees.