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According to Reuters, McDonald’s Corp has agreed to pay $3.75 million to settle a lawsuit claiming it was liable for labor law violations by a California franchisee, marking what lawyers said was the first time the company has settled legal claims by a group of U.S. workers at one of its franchises.

1. Where was this suit filed?
2. What was the $3.75 million for specifically? How should McDonald’s record the journal entry for this?
3. Why is McDonald’s being penalized for what its franchisee did? Was the franchisee penalized? Discuss.
4. What measures does McDonald’s plan to take to prevent this from happening again?

Wiessner, D. (2016). McDonald’s to pay $3.75 million in first settlement with franchise workers., Oct. 31 (Retrievable online at
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