published on November 1, 2016 - 12:59 AM
Written by The Business Journal Staff

(AP) — McDonald’s has agreed to pay $3.75 million to settle a federal lawsuit that sought to hold the company liable for allegations that a franchise owner in the San Francisco Bay Area cheated hundreds of workers out of wages and overtime.

A lawyer for the workers on Monday called the settlement agreement filed in court Friday a historic victory for hundreds of workers but the company said it settled to avoid ongoing legal costs.

The lawsuit filed in 2014 in federal court in San Francisco is among several suits in recent years that have sought a court order designating McDonald’s as the joint employer of workers at its franchise restaurants.

Franchised locations account for the vast majority of McDonald’s more than 14,000 U.S restaurants.

Joint employer status would make the company and not just franchisees responsible for working conditions at restaurants.

The National Labor Relations Board is also arguing that company should be considered a joint employer in a separate and closely watched case over claims McDonald’s workers were subject to retaliation for taking part in protests and strikes seeking wages of $15 an hour and a union. A trial in that case began in March in New York.

A judge in the San Francisco suit ruled last year that McDonald’s was not a joint employer.

But he opened a different path that could be used to hold McDonald’s liable for the alleged labor violations of the franchise owner by allowing the workers to argue they believed McDonald’s was their employer.

Joe Sellers, an attorney for the workers, said Monday that the $3.75 million settlement was “historic” because it marked the first time that company is committed to paying workers for labor violations in a franchisee-operated store.

Company’s spokeswoman Terri Hickey said in a statement that the company reached a settlement to avoid the costs and disruption of continued litigation.

“As this court previously ruled, McDonald’s is not a joint employer of its independent franchisees’ employees,” she said. “With this agreement, McDonald’s reconfirms that it is not the employer of or responsible for employees of its independent franchisees.”

The lawsuit alleged workers at the five Bay Area McDonald’s franchises did not receive all their earned wages through September 2013, overtime for overnight shifts, required meal periods and rest breaks and reimbursement for time and money spent ironing and cleaning their uniforms.

It accused McDonald’s of controlling the terms and conditions of employment at the franchises in part by insisting that the owner strictly monitor and curtail labor costs.

Sellers said more than 800 workers will benefit from the settlement. Attorneys previously reached a settlement with the franchise owner.

Eligible workers will be compensated based on the number of hours they worked — calculations that have yet to be completed.

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