Guadalupe Salazar v. McDonald's Corp. ( 2019 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GUADALUPE SALAZAR; GENOVEVA No. 17-15673
LOPEZ; JUDITH ZARATE, on behalf
of themselves and all others D.C. No.
similarly situated, 3:14-cv-02096-RS
Plaintiffs-Appellants,
v. OPINION
MCDONALD’S CORP., a
corporation; MCDONALD’S USA,
LLC, a limited liability company;
MCDONALD’S RESTAURANTS OF
CALIFORNIA, INC., a corporation;
BOBBY O. HAYNES SR. AND CAROL
R. HAYNES FAMILY LIMITED
PARTNERSHIP, dba McDonald’s,
erroneously sued as Bobby O.
Haynes and Carole R. Haynes
Family Limited Partnership,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of California
Richard Seeborg, District Judge, Presiding
Argued and Submitted October 17, 2018
San Francisco, California
2 SALAZAR V. MCDONALD’S CORP.
Filed October 1, 2019
Before: Sidney R. Thomas, Chief Judge, and Andrew J.
Kleinfeld and Susan P. Graber, Circuit Judges.
Opinion by Judge Graber;
Partial Concurrence and Partial Dissent by
Chief Judge Thomas
SUMMARY*
California Employment Law
The panel affirmed the district court’s summary judgment
in favor of McDonald’s Corp. in a class action brought by
McDonald’s employees alleging that they were denied
overtime premiums, meal and rest breaks, and other benefits
in violation of the California Labor Code.
The plaintiff class members worked at McDonald’s
franchises in the Bay Area operated by the Haynes Family
Limited Partnership.
The panel held that the district court properly ruled that
McDonald’s was not an employer under the “control”
definition, which requires “control over the wages, hours,
or working conditions.” Martinez v. Combs, 231 P.3d 259,
277 (Cal. 2010). The panel also held that the district court
correctly concluded that McDonald’s did not meet the “suffer
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
SALAZAR V. MCDONALD’S CORP. 3
or permit” definition of employer. The panel held that under
California common law, McDonald’s cannot be classified as
an employer of its franchisees’ workers. The panel concluded
that although there was arguably evidence suggesting that
McDonald’s was aware that Haynes was violating
California’s wage-and-hour laws with respect to Haynes’
employees, there was no evidence that McDonald’s had the
requisite level of control over plaintiffs’ employment to
render it a joint employer under applicable California
precedents.
The panel held that McDonald’s cannot be held liable for
wage-and-hour violations under an ostensible-agency theory.
The panel rejected plaintiffs’ claim that McDonald’s
owed them a duty of care, which it breached by supervising
Haynes’ managers inadequately and failing to prevent the
alleged hour-and-wage violations. The panel held that
plaintiffs met neither the damages nor the duty elements
required to prove negligence.
The panel did not consider plaintiffs’ arguments on the
merits of the district court’s rulings striking plaintiffs’
representative Private Attorney General Act claims, and
denying class certification.
Chief Judge Thomas concurred in part and dissented in
part. Chief Judge Thomas agreed with the majority that there
was no genuine issue of material fact regarding whether
McDonald’s was an employer under the “control” or common
law definitions. Dissenting, Chief Judge Thomas would hold
4 SALAZAR V. MCDONALD’S CORP.
that there were genuine issues of material fact regarding
whether McDonald’s was a joint employer of franchise
location workers under the “suffer or permit” definition.
COUNSEL
Michael Rubin (argued), Barbara J. Chisholm, P. Casey Pitts,
and Matthew J. Murray, Altshuler Berzon LLP, San
Francisco, California; Joseph M. Sellers and Miriam R.
Nemeth, Cohen Milstein Sellers & Toll PLLC, Washington,
D.C.; for Plaintiffs-Appellants.
Pratik A. Shah (argued), James E. Tysse, and Martine E.
Cicconi, Akin Gump Strauss Hauer & Feld LLP, Washington,
D.C.; Michael I. Gray and Elizabeth B. McRee, Jones Day,
Chicago, Illinois; Kelsey Israel-Trummel, Jones Day, San
Francisco, California; for Defendants-Appellees.
Catherine K. Ruckelshaus, National Employment Law
Project, New York, New York; Shannon Liss-Riordan,
Lichten & Liss-Riordan P.C., Boston, Massachusetts; for
Amici Curiae National Employment Law Project, Impact
Fund, Legal Aid at Work, Centro Legal de la Raza, Asian
Americans Advancing Justice—Los Angeles, Los Angeles
Alliance for a New Economy, and Equal Rights Advocates.
Dennis J. Herrera, City Attorney; Christine Van Aken, Chief
of Appellate Litigation, Yvonne Meré, Chief of Complex &
Affirmative Litigation; Matthew Goldberg, Deputy City
Attorney; Office of the City Attorney, San Francisco,
SALAZAR V. MCDONALD’S CORP. 5
California; Barbara J. Parker, City Attorney; Maria Bee,
Special Counsel; Erin Bernstein, Senior Deputy City
Attorney; Malia McPherson, Attorney; Office of the City
Attorney, Oakland, California; for Amici Curiae City of
Oakland and City and County of San Francisco.
Karen Marchiano, DLA Piper LLP (US), East Palo Alto,
California; Norman M. Leon and John F. Verhey, DLA Piper
LLP (US), Chicago, Illinois; for Amici Curiae International
Franchise Association and California Restaurant Association.
Robert R. Roginson, Ogletree Deakins Nash Smoak &
Stewart P.C., Los Angeles, California, for Amici Curiae
Employers Group and Chamber of Commerce of the United
States of America.
6 SALAZAR V. MCDONALD’S CORP.
OPINION
GRABER, Circuit Judge:
In this class action, workers employed at McDonald’s
franchises in California appeal from a summary judgment
entered in favor of McDonald’s. Plaintiffs allege that they
were denied overtime premiums, meal and rest breaks, and
other benefits in violation of the California Labor Code.
Plaintiffs further allege that McDonald’s (the franchisor) and
the franchisee are joint employers and that McDonald’s is,
therefore, liable for these violations. The district court held
that McDonald’s is not a joint employer of the franchisee’s
employees and that Plaintiffs’ ostensible-agency and
negligence claims fail as a matter of law. Reviewing the
summary judgment de novo, and viewing the facts in the light
most favorable to Plaintiffs, Animal Legal Def. Fund v. FDA,
836 F.3d 987, 988–89 (9th Cir. 2016) (en banc) (per curiam),
we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
McDonald’s U.S.A., LLC1 contracts with franchisees to
license the McDonald’s name, trademark, and various
business practices. The Haynes Family Limited Partnership
(“Haynes”) operated eight McDonald’s franchises in Oakland
and San Leandro, California, during the relevant period. The
franchise agreements required Haynes to pay fees to
McDonald’s. To maintain the franchise, Haynes had to meet
certain standards, such as serving McDonald’s products.
1
McDonald’s Corp. is also a defendant. For ease of reference we
label the McDonald’s defendants collectively as “McDonald’s.”
SALAZAR V. MCDONALD’S CORP. 7
Plaintiffs Guadalupe Salazar, Genoveva Lopez, and Judith
Zarate worked at a Haynes-operated McDonald’s franchise
restaurant in Oakland. They sued McDonald’s and Haynes
on behalf of a class of approximately 1,400 employees at
Haynes-operated McDonald’s franchises in the Bay Area.
They allege that McDonald’s and Haynes denied overtime
premiums, meal and rest breaks, and other benefits in
violation of California wage-and-hour statutes. Plaintiffs also
allege negligence and seek civil penalties under California’s
Private Attorneys General Act (“PAGA”). Plaintiffs further
allege that McDonald’s and Haynes are their joint employers.
The relevant facts in the record, viewed in Plaintiffs’ favor,
are these.
Haynes selects, interviews, and hires employees for its
franchises. It trains new employees and sets their wages,
which are paid from Haynes’ bank account. Haynes sets
employees’ schedules and monitors their time entries.
Haynes also supervises, disciplines, and fires employees such
as Plaintiffs. There is no evidence that McDonald’s performs
any of those functions.
Nonetheless, evidence in the record, viewed in Plaintiffs’
favor, would permit a finding that McDonald’s could have
prevented some of the alleged wage-and-hour violations but
did not do so. Under the franchise agreement, McDonald’s
required Haynes to use its Point of Sale (“POS”) and In-Store
Processor (“ISP”) computer systems every day to open and
close each franchise location of McDonald’s. Managers of
the Haynes McDonald’s franchises took various courses with
McDonald’s at Hamburger University and then trained other
employees on topics such as meal and rest break policies. At
least one McDonald’s-trained manager was required to be
present during each shift at the Haynes franchises.
8 SALAZAR V. MCDONALD’S CORP.
Haynes management also voluntarily used the
McDonald’s computer systems for scheduling, timekeeping,
and determining regular and overtime pay through
applications that come with the ISP software, including
e*Restaurant People Management Deployment and
McDonald’s Dynamic Shift Positioning Tool. The
e*Restaurant app is described as “a bundle of tools designed
to innovate employee management—from hire to retire.” It
includes e*HR and e*Labor. The Positioning Tool
determines where employees “should be positioned
throughout their shifts and what duties they should perform.”
McDonald’s encouraged franchisees to use these additional
applications but did not require them to do so.
McDonald’s ISP system assigns all hours recorded by
workers to the date on which the shift began, including on
overnight shifts. Plaintiffs allege that this system caused
many employees who worked more than eight hours in a 24-
hour period—for example, by working an overnight shift
followed by a day shift—to miss out on overtime pay that
they earned, because the system did not recognize these
additional hours as overtime. The ISP system is also set to
daily and weekly overtime thresholds of 8:59 hours (instead
of 8:00 hours) and 50:00 hours (instead of 40:00 hours).
Plaintiffs allege that the system’s settings caused many
workers to miss out on overtime pay that they earned for
working between eight and nine hours in one day or between
40 and 50 hours in one week. The ISP settings do not
schedule any rest breaks or require second meal periods.
Under the ISP settings, meal periods are set to occur at
intervals of 5:15, 5:30, or 6:00 hours, instead of at the five-
hour mark required by California law. And the ISP does not
flag when rest breaks are missed. Plaintiffs allege that these
SALAZAR V. MCDONALD’S CORP. 9
settings caused workers to miss out on overtime pay that they
should have earned for missed and late breaks.
McDonald’s represented to Haynes that its computer
systems were “user-friendly” and would make “personnel
maintenance easier.” It further attested that the ISP settings
were compliant with labor laws and strongly encouraged
Haynes not to change any of the settings. And in some
instances, Haynes management did not even have the ability
to change ISP system settings to fix overtime allocation
errors.
Additionally, McDonald’s required Haynes’ employees
to wear standard uniforms and to keep those uniforms “clean
and neat.” Plaintiffs allege that their working conditions—for
example, being stationed near hot grease—caused excessive
soiling of their uniforms, which in turn required special
cleaning.
After the filing of this action, Plaintiffs and Haynes
reached a classwide settlement involving both injunctive and
monetary relief. McDonald’s then moved for summary
judgment on the ground that it is not a joint employer of
workers at franchises and that it owes them no duty of care.
The district court entered summary judgment in favor of
McDonald’s, ruling that McDonald’s is not a joint employer
of Plaintiffs because “it d[oes] not retain or exert direct or
indirect control over plaintiffs’ hiring, firing, wages, hours, or
material working conditions” and does not “suffer or permit
plaintiffs to work, [or] engage in an actual agency
relationship” with the franchisee. The court denied Plaintiffs’
negligence claim on the basis of California’s “new-right
exclusive remedy doctrine.” Later, the court granted
McDonald’s’ Federal Rule of Civil Procedure 12(f) motion to
10 SALAZAR V. MCDONALD’S CORP.
strike Plaintiffs’ PAGA claims because a classwide
adjudication of Plaintiffs’ ostensible-agency theory was
“unmanageable.” McDonald’s then filed another summary
judgment motion, arguing that ostensible agency can never
support employer liability for California wage-and-hour
violations. The court granted that summary judgment motion,
holding that California Wage Order No. 5-2001, section
2(H)’s definition of an employer precludes ostensible-agency
liability. Plaintiffs timely appealed.
DISCUSSION
A. Joint Employment
Under California Wage Order No. 5-2001, section 2(H),
an “employer” is 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 Wage Order No. 5-2001, the California
Supreme Court has provided three alternative definitions for
what it means for a person or entity to “employ[]” someone:
“(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.”
Martinez v. Combs, 231 P.3d 259, 277–79 (Cal. 2010).
“When interpreting state law, we are bound to follow the
decisions of the state’s highest court.” Paulson v. City of San
Diego, 294 F.3d 1124, 1128 (9th Cir. 2002) (en banc). And
“[w]hen the state supreme court has not spoken on an issue,
we must determine what result the court would reach based
on state appellate court opinions, statutes and treatises.” Id.Martinez considered whether seasonal agricultural
workers were employed, not solely by the strawberry farmer
SALAZAR V. MCDONALD’S CORP. 11
for whom they worked directly, but also by the produce
merchants to whom the farmer sold strawberries. 231 P.3d
at 262–68. The court held that the farmer alone employed the
agricultural workers because he “hired and fired his
employees, trained them when necessary, told them when and
where to report to work, when to start, stop and take breaks,
provided their tools and equipment, set their wages, paid
them, handled their payroll and taxes, and purchased their
workers’ compensation insurance.” Id. at 264 (footnote
omitted). By contrast, the produce merchants merely
provided financial support to the farmer and generally
benefited from the workers’ labor. Id. at 282. Any direct
orders that they gave—for instance, instructing workers on
how best to pack the strawberries—were for quality control
purposes. See id. at 281–87.
Following the Martinez decision, the California Supreme
Court considered whether “a franchisor stand[s] in an
employment . . . relationship” with franchisee employees “for
purposes of holding it vicariously liable for workplace
injuries” caused by other employees. Patterson v. Domino’s
Pizza, LLC, 333 P.3d 723, 725 (Cal. 2014). Echoing
Martinez, the court held that the franchisor was not a joint
employer because a franchisor “becomes potentially liable for
actions of the franchisee’s employees, only if it has retained
or assumed a general right of control over factors such as
hiring, direction, supervision, discipline, discharge, and
relevant day-to-day aspects of the workplace behavior of the
franchisee’s employees.” Patterson, 333 P.3d at 739–40.
1. “Control” Definition of Employer
The district court properly ruled that McDonald’s is not
an employer under the “control” definition, which requires
12 SALAZAR V. MCDONALD’S CORP.
“control over the wages, hours, or working conditions,”
Martinez, 231 P.3d at 277. Any direct control that
McDonald’s asserts over franchisees’ workers is geared
toward quality control, as was true in Martinez and Patterson.
McDonald’s does not retain “a general right of control” over
“day-to-day aspects” of work at the franchises. Franchisors
like McDonald’s need the freedom to “impose[]
comprehensive and meticulous standards for marketing
[their] trademarked brand and operating [their] franchises in
a uniform way.” Patterson, 333 P.3d at 725–26.
McDonald’s involvement in its franchises and with workers
at the franchises is central to modern franchising and to the
company’s ability to maintain brand standards, but does not
represent control over wages, hours, or working conditions.
2. “Suffer or Permit” Definition of Employer
The district court also correctly concluded that
McDonald’s does not meet the “suffer or permit” definition
of employer. Plaintiffs argue that McDonald’s is a joint
employer because it induced Haynes to use the ISP system,
while discouraging changes in that system that would have
conformed to California wage-and-hour laws—that is,
because McDonald’s had the ability to prevent wage-and-
hour violations caused by its ISP system’s settings yet failed
to do so. Plaintiffs’ focus on responsibility for the alleged
violations of wage-and-hour laws is misplaced, because the
“suffer or permit” definition pertains to responsibility for the
fact of employment itself. The question under California law
is whether McDonald’s is one of Plaintiffs’ employers, not
whether McDonald’s caused Plaintiffs’ employer to violate
SALAZAR V. MCDONALD’S CORP. 13
wage-and-hour laws by giving the employer bad tools or bad
advice.2
The history and meaning of “suffer or permit” are well
explained in Curry v. Equilon Enterprises, LLC, 233 Cal.
Rptr. 3d 295 (Ct. App. 2018). The basis of liability, the Court
of Appeal explained, is “the defendant’s knowledge of and
failure to prevent the work from occurring.” Id. at 311
(quoting Martinez, 231 P.3d at 282). Applying that
understanding, derived from California Supreme Court cases,
the Court of Appeal held that the owner of a gas station was
not an employer of the station operator’s manager, because
the responsibility for hiring, firing, and assignment of daily
tasks belonged to the lessee/operator: “Shell did not
acquiesce to [the plaintiff’s] employment because Shell was
not in a position to terminate [the plaintiff] or hire a different
person to perform the tasks [he] performed.” Id. And,
“[b]ecause the ‘good cause shown’ clause was not triggered,
Shell could not have [the plaintiff] physically removed from
the station.” Id. Therefore, the court held that Shell could
neither suffer nor permit the plaintiff to work. Id.; see also
Turman v. Superior Court, 246 Cal. Rptr. 3d 607, 618–20 (Ct.
App. 2017) (holding that the owner of the employing entity
may be a joint employer under state wage-and-hour laws
where the owner dominated the employing entity, hired and
fired the non-exempt managers, instructed them to fire the
plaintiff, and exercised actual control over the employing
entity’s employees); Futrell v. Payday Cal., Inc., 119 Cal.
Rptr. 3d 513, 524–25 (Ct. App. 2010) (applying Martinez and
holding that a payroll processing service was not a joint
employer, even though the payroll service exercised control
2
We need not and do not decide here whether McDonald’s may be
liable to Haynes.
14 SALAZAR V. MCDONALD’S CORP.
over workers’ wages by calculating their pay and tax
withholding and by issuing paychecks on its own account,
and reasoning that “[t]here is no evidence in the current case
[the defendant] allowed [the plaintiff] to suffer work, or
permitted him to work, because there is no evidence showing
[the defendant] had the power to either cause him to work or
prevent him from working”).
Guerrero v. Superior Court, 153 Cal. Rptr. 3d 315 (Ct.
App. 2013), on which Plaintiffs rely, is consistent with Curry.
Guerrero held that, although Sonoma County and the
Sonoma County In-Home Support Services Public Authority
do not directly hire, fire or supervise
providers, through their “power of the purse”
and quality control authority, [the County and
Public Authority] have the ability to prevent
recipients and providers from abusing [in-
home support services] authorizations both as
to the type of services performed and the
hours worked. [The County and Public
Authority] exercise effective control over the
eligibility determination and the authorization
of particular services for recipients. They can
investigate instances of suspected fraud or
abuse of the program and can terminate
payments where fraud is demonstrated.
Id. at 346. In context, the “power of the purse” and the
“quality control authority” both appear effectively to describe
power over hiring and firing, see id. at 345–47, not the ability
merely to prevent wage-and-hour violations. Moreover,
Guerrero considered two public entities—Sonoma County
and the Public Authority—with somewhat overlapping
SALAZAR V. MCDONALD’S CORP. 15
responsibility for implementing a program of benefits,
specifically in-home support services to eligible recipients.
Id. at 319, 321–25. Guerrero did not consider a relationship
(franchise or otherwise) between independent, private
companies.
The more cabined meaning of “suffer or permit to work”
stated in Curry does not render that definition superfluous
when considered in the context of the other two definitions of
employer, as Plaintiffs argue. Under other state laws and the
Fair Labor Standards Act, for example, the “suffer or permit
to work” definition typically applies when a staffing agency,
as the primary employer, supplies employees to another entity
or person. See, e.g., Tolentino v. Starwood Hotels & Resorts
Worldwide, Inc., 437 S.W.3d 754, 758–61 (Mo. 2014)
(holding that the owner/operator of a hotel was a joint
employer with the staffing agency that supplied employees to
the hotel); Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298,
305–06 (4th Cir. 2006) (holding that a Saudi prince jointly
employed the person who guarded him, along with the
security firm that employed and provided the guard). Such
entities or persons would not be covered by the other,
alternative definitions of employer.
We acknowledge that Martinez states ambiguously that
“[a] proprietor who knows that persons are working in his or
her business without having been formally hired, or while
being paid less than the minimum wage, clearly suffers or
permits that work by failing to prevent it, while having the
power to do so.” 231 P.3d at 281. But Martinez held that the
defendants did not suffer or permit the plaintiffs to work
“because neither had the power to prevent plaintiffs from
working,” and the court noted that the third-party employer
“had the exclusive power to hire and fire [the] workers, to set
16 SALAZAR V. MCDONALD’S CORP.
their wages and hours, and to tell them when and where to
report to work.” Id. at 282 (emphasis added); cf. Patterson,
333 P.3d at 739 (“A franchisor . . . becomes potentially liable
for actions of the franchisee’s employees, only if it has
retained or assumed a general right of control over factors
such as hiring, direction, supervision, discipline, discharge,
and relevant day-to-day aspects of the workplace behavior of
the franchisee’s employees.”).
Plaintiffs also call our attention to Dynamex Operations
West, Inc. v. Superior Court, 416 P.3d 1 (Cal. 2018). There,
the California Supreme Court adopted a new test for
distinguishing employees from independent contractors under
California wage orders. That case has no bearing here,
because no party argues that Plaintiffs are independent
contractors. Plaintiffs are Haynes’ employees; the relevant
question is whether they are also McDonald’s’ employees.
3. “Common Law” Definition of Employer
Finally, the district court correctly concluded that
McDonald’s is not an employer under the common law
definition. According to California common law, “[t]he
principal test of an employment relationship is whether the
person to whom service is rendered has the right to control
the manner and means of accomplishing the result desired.”
S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations,
769 P.2d 399, 404 (Cal. 1989) (internal quotation marks
omitted); see also Ayala v. Antelope Valley Newspapers, Inc.,
327 P.3d 165, 171 (Cal. 2014) (the person or entity “retains
all necessary control over its operations” (internal quotation
marks omitted)). In Patterson, the court held that the
“‘means and manner’ test generally used by the Courts of
Appeal cannot stand for the proposition that a comprehensive
SALAZAR V. MCDONALD’S CORP. 17
[franchise] system alone constitutes the ‘control’ needed to
support vicarious liability claims.” 333 P.3d at 738. Instead,
in the franchise context, a franchisor also must “retain[] or
assume[] a general right of control over factors such as hiring,
direction, supervision, discipline, discharge, and relevant day-
to-day aspects of the workplace behavior of the franchisee’s
employees.” Id. at 739. Essentially, Patterson established a
connection between the “control” and “common law”
definitions of employer in the franchise context.
Here again, McDonald’s exercise of control over the
means and manner of work performed at its franchises is
geared specifically toward quality control and maintenance of
brand standards. Thus, McDonald’s cannot be classified as
an employer of its franchisees’ workers under the common
law definition.
In short, arguably there is evidence suggesting that
McDonald’s was aware that Haynes was violating
California’s wage-and-hour laws with respect to Haynes’
employees. But there is no evidence that McDonald’s had the
requisite level of control over Plaintiffs’ employment to
render it a joint employer under the principles set forth in
Martinez, Curry, and other applicable California precedents.
B. Ostensible Agency
Plaintiffs next argue that McDonald’s is liable for wage-
and-hour violations under an ostensible-agency theory,
pursuant to Wage Order 5-2001. As noted, that order defines
“employer” to mean 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.” Id. § 2(H). By its plain terms, the reference to an
18 SALAZAR V. MCDONALD’S CORP.
“agent” applies only to an entity that actually employs the
worker or that actually exercises control over the wages,
hours, or working conditions of the worker. McDonald’s
does none of those things.
Plaintiffs correctly note that, in California, agency
principles ordinarily encompass both actual and ostensible
agency. See, e.g., Pasadena Medi-Ctr. Assocs. v. Superior
Court, 511 P.2d 1180, 1186 (Cal. 1973) (so stating). But the
Wage Order is more specific and, therefore, controls. Cal.
Civ. Proc. Code § 1859. Thus, we hold that McDonald’s
cannot be held liable for those violations under an ostensible-
agency theory.
C. Negligence Claim
Next, Plaintiffs allege that McDonald’s owed them a duty
of care, which it breached by supervising Haynes’ managers
inadequately and thereby failing to prevent the alleged wage-
and-hour violations. This claim fails for two reasons.
First, the negligence claim arises from the same facts as
the wage-and-hour claims. Under California law, “where a
statute creates a right that did not exist at common law and
provides a comprehensive and detailed remedial scheme for
its enforcement, the statutory remedy is exclusive.” Rojo v.
Kliger, 801 P.2d 373, 381 (Cal. 1990).
The California Labor Code created new rights not
previously existing at common law. Brewer v. Premier Golf
Props., 86 Cal. Rptr. 3d 225, 232–33 (Ct. App. 2008).
Plaintiffs contend that their negligence claim did exist at
common law because it is a claim for negligent supervision
of Haynes. But that theory cannot succeed unless Plaintiffs
SALAZAR V. MCDONALD’S CORP. 19
prove damages. Mendoza v. City of Los Angeles, 78 Cal.
Rptr. 2d 525, 528 (Ct. App. 1998) (“The elements of a cause
of action for negligence are (1) a legal duty to use reasonable
care, (2) breach of that duty, and (3) proximate cause between
the breach and (4) the plaintiff’s injury.”). And Plaintiffs
cannot prove damages except by establishing a statutory
wage-and-hour violation, which brings us full circle to the
exclusivity of the statutory remedy.
Second, Plaintiffs must also prove duty. Id. Under
California law McDonald’s had no “supervisory” duties with
respect to Haynes. See Patterson, 333 P.3d at 743 (holding
that a franchisor is liable vicariously only “if it has retained
or assumed the right of general control over the relevant day-
to-day operations at its franchised locations”); cf.
Goonewardene v. ADP, LLC, 434 P.3d 124, 139 (Cal. 2019)
(holding that a payroll company did not have a tort duty of
care to an employee with respect to the obligations imposed
by the applicable labor statutes and wage orders and stating:
“An employee’s interest in this regard is fully protected by
the employee’s well-established right under labor statutes to
recover in a civil action against the employer the full wages
and other significant remedies (including attorney fees and
potential civil penalties) that are authorized under those
statutes.”). Therefore, Plaintiffs meet neither the damages
nor the duty elements required to prove negligence.
D. PAGA Claim and Denial of Class Certification
Finally, Plaintiffs contend that the district court erred by
striking their representative PAGA claim and by denying
class certification. Because we affirm dismissal of all claims,
we need not and do not consider Plaintiffs’ arguments on the
merits of these rulings. See Cal. Labor Code § 269920 SALAZAR V. MCDONALD’S CORP.
(employment relationship required to recover PAGA
penalties).
AFFIRMED.
THOMAS, Chief Judge, concurring in part and dissenting in
part:
I agree with the majority that the district court properly
concluded that no genuine issues of material fact exist
regarding whether McDonald’s is an employer under the
“control” or common law employer definitions. However,
because genuine issues of material fact exist regarding
whether McDonald’s is a joint employer of franchise location
workers under the “suffer or permit” definition, I respectfully
dissent.
The “remedial nature” and legislative history of
California wage-and-hour laws compel a broader reading of
the “suffer or permit” definition than the one the majority
adopts today. See Martinez, 49 Cal. 4th at 61 (explaining the
“remedial nature of the legislative enactments authorizing the
regulation of wages, hours[,] and working conditions” were
“for the protection and benefit of employees” and should be
“liberally construed with an eye to promoting such
protection”). The “suffer or permit” definition, used in wage
orders since 1916, has its roots in the language of early 20th-
century statutes prohibiting child labor. Id. at 69. “Statutes
so phrased were generally understood to impose liability on
the proprietor of a business who knew child labor was
occurring in the enterprise but failed to prevent it, despite the
absence of a common law employment relationship.” Id.
SALAZAR V. MCDONALD’S CORP. 21
at 69; see also id. at 58 (explaining that courts applying this
language before 1916 imposed liability on a manufacturer for
industrial injuries suffered by a boy hired by his father to oil
machinery and a mining company for injuries sustained by a
boy paid by coal miners to carry water). As the California
Supreme Court has explained, this “historical meaning
continues to be highly relevant today: A proprietor who
knows that persons are working in his or her business without
having been formally hired, or while being paid less than the
minimum wage, clearly suffers or permits that work by
failing to prevent it, while having the power to do so.” Id.
The basis for liability under this definition is thus a
defendant’s failure “to prevent the unlawful condition” or “to
perform the duty of seeing to it that the prohibited condition
does not exist.” Id. It “rests upon principles wholly distinct
from those relating to master and servant.” Id. And it is
more expansive than the definition for employer status based
on control. See e.g., id. at 58 (explaining the test is designed
to reach even irregular working arrangements).
The factual circumstances in Martinez and Patterson do
not directly implicate the “suffer or permit” definition, nor do
they compel an opposite conclusion. In Martinez, the
unrelated merchants had no knowledge that work was
occurring under unlawful conditions nor did they cause it or
have the power but fail to prevent it from occurring. Id. at 70.
In Patterson, Domino’s did not cause and had no knowledge
of, nor the ability to, remedy the sexual harassment out of
which that case arose. 60 Cal. 4th at 502–03. Indeed, the
court in Patterson underscored that “[t]he uncontradicted
evidence showed that the franchisee imposed discipline
consistent with his own personnel policies, declined to follow
the ad hoc advice of the franchisor’s representative, and
22 SALAZAR V. MCDONALD’S CORP.
neither expected nor sustained any sanction for doing so.” Id.
at 479.
In contrast, Plaintiffs here presented evidence that
McDonald’s In-Store Processor computer system (“ISP”)—
with settings McDonald’s prescribed, instructed Haynes to
use, and represented were in compliance with wage-and-hour
laws—was a direct cause of their lost wages. Under the
franchise agreement, McDonald’s requires Haynes to use its
ISP computer systems to open and close each franchise
location of McDonald’s for the day. McDonald’s ISP system
assigns all hours recorded by workers to the date the shift
began, including on overnight shifts. Plaintiffs allege this
system caused many workers who worked more than eight
hours in a 24-hour day—for example, by working an
overnight shift followed by a day shift—to miss out on
overtime pay they earned because the system did not
recognize these additional hours as overtime. The ISP system
is also set to daily and weekly overtime thresholds of
8:59 hours (instead of 8:00 hours) and 50:00 hours (instead of
40:00 hours). Plaintiffs allege the system settings caused
many workers to miss out on overtime pay they earned for
working between eight and nine hours in one day or between
40–50 hours in one week. The ISP settings do not schedule
any rest breaks or require second meal periods. The ISP
settings for meal periods are set at 5:15, 5:30, or 6:00 hours
instead of the 5:00 hours required by California law. And the
ISP does not flag when rest breaks are missed. Plaintiffs
allege these settings caused workers to miss out on overtime
pay they earned for missed and late breaks. Plaintiffs allege
that Haynes management had limited or no ability to change
the ISP system to fix overtime allocation errors. They also
presented evidence suggesting McDonald’s was aware that
work was occurring under unlawful conditions because
SALAZAR V. MCDONALD’S CORP. 23
Haynes received “Labor Violations” from McDonald’s for
shifts where workers should have received proper meal and
rest breaks. Reasonable inferences can be drawn that
McDonald’s had the ability to prevent wage-and-hour
violations caused by its ISP system settings yet failed to do
so.
In deciding whether summary judgment was appropriate,
we must draw all reasonable inferences in favor of the
plaintiffs. In liberally construing California Wage Order No.
5-2001, §2(E), and analyzing decisions of California’s
highest court, I cannot conclude there are no triable issues
regarding whether McDonald’s is a joint employer of
franchise location workers under the “suffer or permit”
definition. For this reason, I would reverse the district court’s
grant of summary judgment for Defendant, and I respectfully
dissent, in part.1
1
I would accordingly find that the district court’s denial of class
certification and its order striking Plaintiffs’ PAGA claim were in error
because they were based on the improper grant of summary judgment. I
would not reach Plaintiff’s alternative negligence claim.