Last year, McDonald’s and one of its franchisees faced an employment discrimination lawsuit that may be a sign of things to come. The lawsuit, brought by employees of McDonald’s franchises in Virginia, claimed both the franchisor and the franchisee were liable for alleged race and gender discrimination committed by supervisors at the restaurants. While the case settled, it along with recent labor law developments provide an interesting current look at employment discrimination cases in the fast food franchise business.

We’ll discuss the allegations in the recent discrimination lawsuit against McDonald’s and the changing landscape of franchisor liability for the employment actions of franchisees, specifically in the context of violations of anti-discrimination laws. If you’d like to talk with an attorney about your own employment discrimination claim, please contact Eisenberg & Baum. We have a group of employment discrimination attorneys with years of experience handling discrimination claims.

The Allegations of Employment Discrimination Against McDonald’s

Eleven former employees brought the employment discrimination case against McDonald’s and its franchisee, Soweva Co., in federal court in Virginia. The legal basis for their claim was Title VII of the federal Civil Rights Act of 1964, which prohibits discrimination against employees based on their sex, race, color, national origin, or religion. The allegations in the McDonald’s case included both race and sex discrimination claims.

Racial Discrimination

The former employees in the case were all either African-American or Hispanic. The group alleged they’d been discriminated against on the basis of their race, having been harassed and wrongfully terminated on that basis. Please check out our prior blog posts on harassment and wrongful termination for more information about those types of claims.

The harassing conduct allegedly engaged in by the employees’ supervisors included offensive jokes, racial slurs, and a different disciplinary standard than their white counterparts. The employees alleged that, ultimately, the franchise owner decided to decrease the number of African Americans working at his restaurants and targeted them in a mass termination that impacted mostly African American employees. The employees say that, when asked why they were being fired, the owner explained they “didn’t fit the profile” he wanted.

Sexual Harassment

In addition to their racial discrimination allegations, the former employees claimed that their supervisors had also engaged in activity that constituted sexual harassment. Sexual harassment is a form of gender discrimination prohibited under Title VII. For a broader discussion of what constitutes sexual harassment, you can read our prior blog post on how to identify when you have a sexual harassment claim.

Among other allegations, the former McDonald’s employees claimed that supervisors at their workplace made inappropriate comments about employees’ bodies, sent and showed employees inappropriate pictures, touched female employees on their legs and buttocks, and attempted to solicit sexual activity with employees.

Holding a Franchisor Liable for Employment Discrimination

McDonald’s operates under a franchise business model, meaning that the vast majority of McDonald’s restaurants are not actually owned by McDonald’s USA, the franchisor, but by independent franchisees. Many other fast-food restaurant chains, like Subway, Wendy’s, Jack in the Box and Taco Bell, work under a similar model. For many years, franchisors have seen the franchise model as a way to guard against liability for employment law claims under the argument that the franchisee is truly responsible for employment decisions and matters. While this has been accepted in many labor and employment law cases, there has also been an exception for those situations where the franchisor and franchisee are seen as “joint employers” of an employee. Typically, for a franchisor to be considered a joint employer, they would need to have exercised some direct control over the day-to-day operations of the franchisee.

In the McDonald’s case, the plaintiffs sought to hold both the franchisor, McDonald’s Corp. and McDonald’s USA, and franchisee, Soweva Co., accountable for the alleged discrimination the plaintiffs suffered at work. To bring the McDonald’s corporate entity in, they argued that the company had the right to control operations at all of its restaurants through its franchise agreement and its business manuals. According to the plaintiffs, the McDonald’s corporate entity directs everything from how franchisees spend their advertising dollars to how they manage, train and supervise their employees. McDonald’s manuals also contain corporate policies and processes on discrimination and sexual harassment.

The parties to the McDonald’s lawsuit settled the case before it went to trial and the details of the settlement were not made public, so we won’t know if the plaintiffs’ argument for holding the McDonald’s franchisor entity liable would have been successful. However, recent developments in the area of labor law seem to indicate that the standard for holding franchisors liable as joint employers may be expanding in the favor of employees. In August 2015, the National Labor Relations Board issued a ruling in Browning-Ferris Industries of California, Inc. that created a new standard for the joint employer theory of liability in the context of unfair labor practices. The prior standard required an entity to take actual direct action over a worker to be considered a joint employer, while the new standard expands joint-employer status to entities that have indirect control or an unexercised right of control over a worker.

The ruling in Browning-Ferris did not directly apply to franchisors or to employment discrimination claims, but there is reason to believe that the ruling could be used in those contexts. The NLRB is currently in a fight with McDonald’s over whether it should be responsible for labor violations at independently owned franchises. Also, the Equal Employment Opportunity Commission, the federal agency charged with enforcing federal employment discrimination laws, sided with the NLRB’s position in Browning-Ferris noting that the NLRB’s standards can influence the judicial interpretation of joint employment in the discrimination context. The Browning-Ferris ruling is now being appealed and Congress is considering a new law that would overturn the ruling. Whether
franchisors like McDonald’s will be held increasingly responsible for employment law violations at the franchise level remains to be seen.

Who Should Be Responsible for Your Discrimination Claim?

If you’ve been the victim of discrimination and have questions about who should be responsible and what types of legal claims you can bring, we suggest you to contact an attorney immediately. An experienced employment discrimination attorney can advise you about the merits of your claim and the best way to pursue it. Eisenberg & Baum is ready and able to help you with your discrimination claim, and we encourage you to contact us for a free initial consultation.Though we’re based in New York City, we have attorneys licensed in many states throughout the country and we can also become admitted pro hac vice with local counsel in other states where we are not currently admitted, so we likely can help no matter where you are.