McDonald's Corp. will be settling a lawsuit with the workers at one of its franchises for the first time. The fast-food giant will pay $3.75 million to settle the labor laws that the company is liable for.
According to Reuters, the lawyers that represented about 800 employees at five McDonald's restaurant owned by a single franchisee said McDonald's would be paying the workers. $1.75 million will be for back pay and damages, while $2 million will be in legal fees.
The settlement comes as McDonald's faces claim before two U.S. agencies that it is a "joint employer" of workers at franchise restaurants. This designation would make the fast-food giant liable for legal violations by franchisees and would require it to bargain with union workers.
The lawsuit claimed that McDonald's and franchisee Smith Family LP violated California Law. The company and the franchisee failed to pay its workers overtime, keep accurate pay records and reimburse workers for time spent cleaning uniforms.
The lawyers for the workers said that this will be the first time McDonald's will settle with workers at one of its franchises. The franchisee of McDonald's previously settled a $700,000 claims.
The Los Angeles Time reports that for years, McDonald's has been battling in courts across the country to shield itself from wage-hour claims made by workers at franchisees. The fast-food giant has generally succeeded at this.
In the last several months, McDonald's have been fighting with the National Labor Relations Board whether the fast-food giant is a joint employer of workers owned by franchises or not. The case was being heard by an administering judge in New York.
The San Francisco case marks the first time McDonald's was ordered to settle with the workers at one of its franchises. This could have broad implications for the company as it is looking to deny the efforts of other workers to pursue it in court as a class for wage and hour violations.
Joseph Sellers, a lawyer for the worker, said that the result is "historically significant. McDonald's recognized that it had a significant risk if the case went to trial, that we could have established that it was responsible for the conduct in this franchisee workplace."