Why Do Plaintiffs Want Penalties Reduced in Off-the-Clock Work Case?

Fremont, CAOne of the largest, if not THE largest fast-food retailer in the world, was hit with several unpaid wages claims this past spring, alleging off-the-clock work and alterations of time cards in order to reduce costs, or so it is alleged. The unpaid wages lawsuit is proposed as a class action, and is one of four lawsuits making similar allegations.

According to court records, lead plaintiff Jason Hughes had worked at a McDonald’s outlet in Fremont, California, since 2012. A co-plaintiff, Ryan Schuetz, toiled at the same facility from February 2011 through October 2013. Both earned a little more than $8 per hour.

Both plaintiffs in their original California unpaid wages lawsuit in state court alleged their employer had illegally put a limit on meal and rest breaks, altered employees’ clock-in and clock-out times, and required mostly new hires to perform off-the-clock work.

Three other lawsuits alleging similar complaints were filed with an unpaid wages attorney in Alameda County Superior Court in March. The following month, McDonald’s removed the Hughes case to California federal court.

In what appears to be an unusual step, the plaintiffs in the Hughes case have petitioned to have the case returned to state court. It has been alleged that the defendants have incorrectly inflated the estimated damages to be above $5 million, which is the threshold for federal jurisdiction. The plaintiffs maintain that damages and penalties are closer to $4 million, hence the request to return the case to Alameda County Superior Court.

The plaintiffs maintain that $4 million is closer to reality, but that a number of costs added to that figure by McDonald’s inflated the damages estimate above $5 million, or so it is alleged. The plaintiffs assert that McDonald’s assumed that every employee paycheck involved unpaid wages. Plaintiffs also maintain that McDonald’s included potential costs for violations incurred after the case was filed.

Plaintiffs also argued in a brief to US District Judge Phyllis Hamilton that McDonald’s wrongly applied 100 percent of potential penalties and potential attorney’s fees under the Private Attorney General Act (PAGA). Under the Act, the penalties would go to the state, and not the class.

McDonald’s countered that damages and potential penalties were based on the circumstances of the lead plaintiff, and then extrapolated across the entire class. As for potential damages based on future violations, the estimate was based on the plaintiffs’ assertion that off-the-clock work behavior on the part of the chain was expected to continue.

It has been reported that Judge Hamilton took the unpaid wages lawsuit arguments under submission and did not indicate when she would rule on the arguments. The case is Hughes et al v. McDonald’s Corp. et al, Case No. 3:2014cv01700, filed April 11, 2014 at California Northern District Court. Defendants are Fremak Arches, Inc., McDonald’s Restaurants of California Inc., McDonald’s Corp., and McDonald’s USA LLC.