McDonald’s to Pay $3.75M to Settle Franchisee Case

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By Joyce E. Cutler

Oct. 31 — McDonald’s is agreeing to pay $3.75 million to settle alleged wage-and-hour violations at five San Francisco Bay area stores operated by a franchisee ( Ochoa v. McDonald’s Corp. , N.D. Cal., No. 3:14-cv-02098, motion for preliminary approval of settlement filed 10/28/16 ).

Attorneys representing the workers say they believe this is the first employment class action settlement with McDonald's that involves those who work in franchise-operated stores.

Michael Rubin, with Altshuler Berzon LLP in San Francisco, said he expects “to see more and more of these cases until the companies that hold the economic power take more affirmative steps to ensure that the companies they work with ensure full compliance with workplace rights.”

Workers at the restaurants in Oakland and Richmond, Calif., alleged the franchisee consistently erred in converting punch-time data to payroll data and failed to pay daily overtime to those who worked the overnight shifts. Franchisee Smith Family Limited Partnership also allegedly failed to provide meal and rest breaks as California requires, reimburse crew members for expenses and time to iron and clean their uniforms, and provide accurate wage statements.

The settlement must still be approved by Judge James Donato of the U.S. District Court for the Northern District of California.

About 800 workers will share $1.75 million of the settlement if it is approved, and plaintiffs’ counsel will get $2 million in fees and costs under the proposed deal.

Franchisee Has Paid Its Share

“Plaintiffs and their counsel believe that this is the first ever employment class action settlement with McDonald’s involving a certified class of crew members working in franchise-operated stores, and it is certainly by far the largest,” Barbara Chisolm of Altshuler Berzon LLP in San Francisco said in a motion to support preliminary approval.

The Smith Family Limited Partnership already paid $700,000 in settlement, so the $3.75 million is fully the responsibility of McDonald’s, Rubin told Bloomberg BNA Oct. 31.

Counsel for McDonald’s with Quinn Emanuel Urquhart & Sullivan LLP and Jones Day couldn’t be reached for comment.

More than 800 crew members are covered in the settlement, with an average recovery of $1,800 to $1,900 depending on the number of hours and weeks worked in the different classifications, Rubin said separately in an Oct. 31 e-mail to Bloomberg BNA.

“So crew members who worked at those franchised restaurants the longest, and who worked there since one year before we filed the complaint, will receive the largest shares,” Rubin said.

The portion of the settlement for fast-food workers who can’t be located will be reallocated among their co-workers and not revert to McDonald’s. “As a result, the average payout will probably be closer to $2,500 or $3,000, although it’s impossible to know for sure,” Rubin said.

More to Come?

Class members would receive $716,667 in back pay, interest and liquidated damages, $350,000 for wage statement penalties, $350,000 for waiting time penalties, $83,333 for the employee portion of civil penalties under the California Labor Code Private Attorneys General Act. The California Labor and Workforce Development Agency will get $250,000 for labor law enforcement and education.

“A lot of our theories depend on principles of California law, so certainly this approach is one that given the right facts can readily be replicated throughout California,” Rubin said.

The workers allege McDonald’s was jointly liable with the franchisee for California labor law violations. The settlement also requires McDonald’s to train the franchisee on time and payroll software.

The four named class representatives also would receive $500 each under the settlement, which covers workers at the five restaurants during the March 12, 2010-Nov. 5, 2016, class period.

A fairness hearing is scheduled for Dec. 15.

P. Casey Pitts, Matthew J. Murray and Kristen M. Garcia, Altshuler Berzon LLP, San Francisco, and Joseph M. Sellers and Miriam Nemeth, Cohen Milstein Sellers & Toll PLLC, Washington, D.C., also represent the plaintiffs. Brent D. Knight, Jonathan M. Linus and Lawrence C. DiNardo, Jones Day, Chicago, and Jonathan Bunge, Quinn Emanuel Urquhart and Sullivan LLP, Chicago, represent McDonald’s.

To contact the reporter on this story: Joyce E. Cutler in San Francisco at JCutler@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com

For More Information

Text of the motion for preliminary approval of the settlement is available at http://www.bloomberglaw.com/public/document/Ochoa_et_al_v_McDonalds_Corp_et_al_Docket_No_314cv02098_ND_Cal_Ma/3.

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