It’s rare for the corporate headquarters of a fast food restaurant to be held liable for the wrongful actions of a franchisee.

But things might be changing.

Last month, ten workers — nine African Americans and one Hispanic — filed a lawsuit against McDonald’s and one of its franchises in southern Virginia charging that they were subject to rampant racial and sexual harassment committed by the restaurants’ highest-ranking supervisors.

The lawsuit, filed in federal court in Danville, Virginia, alleged that supervisors at McDonald’s in South Boston and Clarksville, Virginia, operated by Soweva, demeaned African American workers, often complaining that there were “too many black people in the store,” called African American workers “bitch,” “ghetto” and “ratchet,” called Hispanic workers “dirty Mexicans,” disciplined African American employees for rule infractions that were forgiven when committed by white employees, inappropriately touched female employees on their legs and buttocks, sent female employees sexual pictures, and solicited sexual relations from female employees.

Soweva became the franchise operator for the South Boston and Clarksville, Virginia McDonald’s near the end of 2013.

At that time, the majority of the restaurants’ employees were African-American.

The lawsuit alleges that soon after it became the franchise operator, Soweva implemented a plan to reduce the number of African-American employees and hire more white employees. Soweva’s owner, Michael Simon, explained to workers that “the ratio was off in each of the stores,” and that he just wanted “the ratio to be equal.”

Soweva’s supervisors were blunt, telling employees that it was “too dark” in the restaurants, and that they were going to hire different workers because they “need to get the ghetto out of the store.”

Before implementing the plan, one supervisor said to the other, “now we can get rid of the niggers and the Mexicans.”

The complaint alleges that a large number of white employees were hired in March 2014.

On May 2, 2014, about fifteen African-American employees were terminated, including a number of the plaintiffs.

When they asked why they were being terminated, Soweva’s owner told them that they were good workers, but they “didn’t fit the profile” of his organization.

The workers are being represented by Narendra Ghosh of Patterson Harkavy in Chapel Hill, North Carolina.

How does Ghosh hope to hold McDonald’s corporate liable?

“Plaintiffs seek to recover not only from the franchise but also from McDonald’s corporate,” Ghosh told Corporate Crime Reporter in an interview last week. “To determine who is liable for workplace discrimination, courts generally look to the degree of control exercised by the company in question over the workplace. They often focus on the company’s authority or control over personnel matters, such as scheduling, wages, hiring, firing, training and discipline. They also look to matters like control over personnel policies.”

“And here, we believe McDonald’s corporate controlled nearly every aspect of the store’s operations. We understand it issued comprehensive policies on nearly all aspects of restaurant operations, which franchises were required to follow. Corporate representatives were on site regularly to guide the day to day operations of the restaurant. Corporate required the use of computer systems that tell the workers and the managers at the franchises how and when to schedule employees and then send information about employees’ work back to corporate. Corporate mandates that franchise owners, managers and supervisors undergo rigorous training on how to follow corporate’s directions, which include matters like discrimination, diversity and harassment. And corporate collects billions in profit annually from its franchises based on the work of the employees there.”

A recent decision by the general counsel’s office at the National Labor Relations Board (NLRB) might play in the workers’ favor.

“The NLRB enforces the National Labor Relations Act — the law that governs relations between unions and the companies as well as relations with employees who are working collectively,” Ghosh said.“That’s the law that the NLRB enforces. The NLRB itself has prosecuted these cases. When it believes there has been a violation of law, it brings cases and it brings them before administrative judges. The general counsel brings those cases forward.”

“Recently, the general counsel has brought about ten complaints about unfair labor practices against McDonald’s. And these complaints have been brought against both the franchise and McDonald’s corporate. Last year, the general counsel made an announcement that he believes McDonald’s corporate is a proper defendant in these actions.”

Is the NLRB bringing an action in this specific case?

“No,” Ghosh said. “This case is being brought under Title VII of the Civil Rights Act of 1964 — section 1981. These are federal anti-discrimination laws. The NLRB does not enforce these laws or bring lawsuits based on these laws. The NLRB is only focused on the labor law. The general counsel’s decision does not directly control the standards or decisions that might occur in this case.”

“But the NLRB cases are relevant because they have brought to the fore questions of franchisor responsibility for franchise operations.”

“The NLRB is enforcing a law that is different than the law in our case. But some of the standards for corporate liability are similar. And the general counsel is looking at the same types of facts that we have alleged in our case. The NLRB cases involve examining the extent of McDonald’s control over its franchises, how they control wages and schedules and all manner of workplace conditions. Much of the inquiry and relevant factors in the NLRB case will likely be shared in our case.”

[For the complete q/a transcript of the Interview with Narendra Ghosh, see 29 Corporate Crime Reporter 5(13), February 2, 2015, print edition only.]