PEOs, Hamburgers, and Joint Employment
PEOs | PEO | PROFESSIONAL EMPLOYER INSURANCE
Happy Monday! Re-publishing this fantastic update from Mike Miller regarding joint employment.------------------------Who would have thought that PEOs would have anything in common with McDonald’s, Hamburger University, and joint employment? Well, earlier this month a three judge panel of the United States Court of Appeals for the 9th Circuit issued a decision interpreting California law regarding a joint employment issue that PEOs will be able to utilize with regard to the bourgeoning number of wage claim cases in California and elsewhere that have been filed against PEOs. In this California case, the Plaintiffs, among other allegations, alleged that they were denied proper overtime premiums, meal and rest breaks, and other benefits in violation of the California Labor Code. Most significantly, the Plaintiffs also alleged that McDonald’s and its franchisee are joint employers and that McDonald’s is, therefore, liable for the wage violations. The district court had held that McDonald’s is not a joint employer of the franchisee’s employees and was not liable for these wage claims and had dismissed these claims in a summary judgment action. On appeal, the 9th Circuit affirmed the lower court ruling.Similar to how PEOs operate, the franchisee, and not McDonald’s, selects, interviews, hires, trains, supervises, disciplines and fires its employees. The franchisee also sets the employees’ wages and their work schedules and monitors their time entries. There was no evidence that McDonald’s performed any of these functions. Interestingly, evidence in the record, if viewed in a manner most favorable to the Plaintiffs (as must be done in a summary judgment proceeding), would have permitted a finding that McDonald’s could have prevented some of the alleged wage-and-hour violations but did not do so, and yet this did not impact the Court in its decision.Under the franchise agreement, McDonald’s required the franchisee to use its Point of Sale (“POS”) and In-Store Processor (“ISP”) computer systems every day. Managers of the franchisee took various courses at McDonald’s Hamburger University and then trained other employees on topics such as meal and rest break policies. The franchisee also voluntarily used the McDonald’s computer systems for scheduling, time keeping, and determining regular and overtime pay through applications that came with the IPS software.Under the applicable California Wage Order, an employer is defined as one “who directly or indirectly, or through an agent or any other person, employs or exercises control over the wages, hours, or working conditions of any person.” In construing this Wage Order, the California Supreme Court has set forth three alternative definitions as to what it means to “employ” someone. These three alternative definitions, any one of which can establish an entity as an employer, are as follows:(a) to exercise control over the wages, hours or working conditions, or (b) to suffer or permit to work, or (c) to engage, thereby creating a common law relationship.
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