It is not very often that the term “joint employer” is used in mainstream media. However, when a major, nationally known employer is involved, the term can quickly become a household name.

Fast-food retailer McDonald’s may become part of this list after a settlement was announced between a California franchisee who owns five restaurants agreed to pay $3.75 million to settle claims of wage and hour violations. According to a fortune.com story, Smith Family, LP violated California law by failing to pay overtime, keep accurate records of work performed and time spent by employees cleaning uniforms. 

Under the settlement, which still must be approved by a federal court judge, calls for the franchisee to pay $1.75 million in damages and back pay to compensate nearly 800 employees, as well as $2 million in legal fees.

In the meantime, McDonald’s faces the possibility of being deemed a “joint employer,” meaning that it could be held liable for the actions of its franchisees when it comes to compliance with (or violations of) state and federal labor laws.

Part of the analysis in determining whether joint employment exists involves the relationship between employees and the prospective employers. Essentially, questions are asked of whether employers

–          Share control over common operations

–          Share supervisory control over common employees

–          Have intermingled operations

–          Treat employees as a pool of workers available to both employers

Indeed, it remains to be seen whether McDonald’s will be deemed a joint employer by the National Labor Relations Board. The decision may have far-reaching implications for other franchise-based companies in the future.