Despite finding that as a matter of law McDonald’s was not directly liable as a joint employer, a California federal judge granted class certification to McDonald’s workers, saying the claims against McDonald’s Corp. can proceed on a classwide basis under a theory of ostensible agency. Under this theory, McDonald’s could be liable because employees reasonably believed they were employed by McDonald’s.
The workers filed the class action in 2014, alleging a variety of wage and hour violations by defendant the Edward J. Smith and Valerie S. Smith Family Limited Partnership (“Smith”), which owns and operates five restaurants in California under a franchise agreement with McDonald’s. Plaintiffs also sued McDonald’s on direct and vicarious liability grounds.
McDonald’s moved for summary judgment on the grounds that it was not a joint employer. The Court granted summary judgment on plaintiffs’ direct liability theories, finding that McDonald’s is not directly liable as a joint employer with the Smiths, but denied it on the issue of whether McDonald’s may be liable on an ostensible agency basis. Ostensible agency exists where (1) the person dealing with the agent does so with reasonable belief in the agent’s authority; (2) that belief is “generated by some act or neglect of the principal sought to be charged,” and (3) the relying party is not negligent. Kaplan v. Coldwell Banker Residential Affiliates, Inc., 59 Cal. App. 4th 741, 747 (1997).
Plaintiffs then settled with the Smiths, leaving the McDonald’s entities as the last standing defendants.
Plaintiffs moved for certification of a class to pursue claims for: (1) miscalculated wages; (2) overtime; (3) meals and rest breaks; (4) maintenance of uniforms; (5) wage statements; and (6) related derivative claims.
Ostensible Agency Not A Bar To Class Certification
McDonald’s argued that allegations of ostensible agency are incapable of being resolved on a classwide basis because they involve individualized questions of personal belief and reasonable reliance on an agency relationship.
The court disagreed, holding that ostensible agency does not demand unique or alternative treatment, and “certainly does not stand entirely outside Rule 23 as impossible to adjudicate on a classwide basis.”