Accountability for corporate gamesmanship

One of the most recognized corporate actors nationally and internationally, McDonald’s, Inc., has agreed to pay nearly $4 million to settle a class action wage case concerning the conduct of a McDonald’s, Inc. franchisee. This result is groundbreaking because it appears to be the first time ever that McDonald’s, Inc. has ever paid money to resolve a case directed at local franchises.

The plaintiffs in this class action unpaid wages case named McDonald’s, Inc. along with the local franchisee as defendants based on the assertion that the two entities are a joint employer. In other words, the plaintiff class contended that the economic realities show an interrelationship between the two supposedly separate companies regarding operations, management, labor relations, financial control, and other business functions such that both entities should be recognized as the employer in the case.

McDonald’s, Inc., like much of corporate America, has vigorously opposed any suggestion that it has a joint employment relationship with another entity. Companies like McDonald’s, Inc. have fought so hard against being considered a joint employer because they want to avoid the corresponding legal exposure – while simultaneously reaping the benefits from being able to control, either directly or indirectly, the franchise, subsidiary, or other affiliate at issue.

The class action victory against McDonald’s, Inc. in this wage case should help other private plaintiffs in employment law and civil rights cases in general. In particular, plaintiffs’ position in the discovery, liability, and remedy phases of litigation can be enhanced by drawing on the lessons learned from this case against McDonald’s, Inc. Results like this also should help to fortify the expanding and increasingly coordinated enforcement actions by the United States Department of Labor and other government agencies.

As has been written previously here, various government agencies are now focusing significant resources on addressing the manipulation of the corporate form as a business model. In fact, McDonald’s, Inc. currently faces legal proceedings before the National Labor Relations Board and the United States Equal Employment Opportunity Commission under a joint employer theory of liability. Two days ago, moreover, McDonald’s, Inc. and franchisees around the country experienced a nationwide Fast Food Strikes involving thousands of workers, public officials, and community leaders demanding a living wage and the right to form and join a union for all non-supervisory employees.