A California federal judge dealt a major blow to employees of a Bay Area McDonald's in their effort to hold the franchisor responsible for its franchisee's alleged failure to pay wages and provide meal and rest breaks. The ruling shut the door on the plaintiffs' argument that franchisor McDonald's could be liable for its franchisees' labor code violations based on an "ostensible agency" relationship.

In Salazar v. McDonald's Corp., the court previously concluded the franchisor was not liable as a joint employer with the franchisee or as the franchisee's principal under an "actual agency" rationale, and that the crew workers' remaining theory that the fast-food giant "ostensibly" controlled their wages was not amenable to class treatment.

With the workers' remaining theory against McDonald's disposed, franchisors who do not directly hire, fire or pay franchisee workers, or control their hours or working conditions, can take a cue from McDonald's to defeat similar "ostensible agency" claims.

In "ostensible agency," the alleged agent "appears" to a reasonable observer to be acting on behalf of a principal. This appearance alone is enough to create liability for the principal party, assuming it bears some responsibility for allowing the appearance to exist. Previously, the crew workers declared that it appeared to them that they and the franchisee worked for McDonald's, with the franchisee acting as McDonald's agent to employ them.

Under California law, 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." The employees argued that the clause "through an agent" was sufficient to render even McDonald's, which only appeared to act as a principal through a franchisee agent, an "employer".

However, the court ruled that the phrase "employs or exercises control over" indicated that to be an employer under California law, there must be actual control, not just the appearance of it.

The crew workers also contended that California wage laws broadly favor workers and that it would advance these goals to adopt their ostensible agency interpretation. The court rejected this argument because it would amount to rewriting the law. Moreover, the argument presumed that McDonald's could remedy the alleged wage violations, a claim the court rejected.

A prudent franchisor facing claims that it shorted a franchisee's employees' pay, rest and meal breaks can look to McDonald's for guidance when the employee asserts a belief that he or she was working for the franchisor.

Read: Salazar v. McDonald's Corp.