NLRB: McDonald's Is Joint Employer With Franchisees

The statement, signed by Heather Smedstad, senior vice president of human resources, went on to say: “McDonald's will contest this allegation in the appropriate forum. McDonald's also believes that this decision changes the rules for thousands of small businesses, and goes against decades of established law regarding the franchise model in the United States.”

Hickey also referred to statements from the International Franchise Association (IFA) and other business trade groups, saying: “This has implications for all franchised businesses ' not just restaurants.” Experts said it could include every business that uses the franchise model, such as 7-Eleven Inc., Hampton Inns hotels, Great Clips hair salons, H&R Block tax preparers and Dunkin' Donuts.

Griffin had signaled this move was coming. In a pending case involving a different company in May, the NLRB asked interested parties to file briefs on whether the agency should revisit its joint-employer standard. See, http://1.usa.gov/1lV9Vzy. All briefs were due by June 26.

Under previous case precedents, the standard requires the parent to have direct and meaningful control of a business. But Griffin is pushing for a looser standard that would consider the “totality of circumstances” to establish if the parent wields sufficient influence over working conditions.

Industry Reaction

IFA president and chief executive Steve Caldeira said in a Statement on NLRB Declaring McDonald's Corporation a “Joint Employer” that such a change would devastate the U.S. franchise model. “The recommendation that franchisors and their franchisees be designated as joint-employers is both wrong and unjustified,” he argued.

Caldeira went on to say that the NLRB was “yielding to intense outside pressure from labor unions led by the Service Employees International Union (SEIU), which is seeking to unionize franchise chains and undermine the proven, time-tested franchise business model.”

The SEIU couldn't immediately be reached for comment, and its website posted no comments about the NLRB announcement by the day after its issuance. ( Editor's Note: SEIU's site does carry a link to a statement issued by MassUniting, a group that describes itself as a “coalition of neighbors, community groups, faith organizations and labor united in the fight for good jobs, corporate accountability, and stronger communities.” MassUniting's release stated: “This determination carries widespread implications for the fast-food industry, and adds to extensive allegations made in class-action lawsuits filed earlier this year that the company is responsible for widespread wage theft. Time and time again, McDonald's has tried to sidestep workers' rights, inventing a make-believe world in which responsibility for wages and working conditions falls squarely on the shoulder of franchisees.” http://bit.ly/VmnFMt.)

Angelo Amador, vice president for labor and workforce policy for the National Restaurant Association, assailed the NLRB action. “The NLRB's change to the joint-employer standard is the latest example of a federal agenda aligned against small businesses,” Amador said. He continued: “From the recent recess appointments of officials to the NLRB who do not respect the contributions of small business to the economy ' struck down by the Supreme Court ' to proposing a rule allowing for 'ambush' elections, reducing the time to organize a union, the NLRB's actions are overreaching.”

But the NLRB general counsel made it clear that his office was looking at a pattern of labor complaints against the Golden Arches. Of 181 complaints against the company, 43 cases were found to have merit and another 64 are still pending investigation. “In the 43 cases where [the] complaint has been authorized, McDonald's franchisees and/or McDonald's USA LLC will be named as a respondent if parties are unable to reach settlement,” Griffin's announcement said.

The action comes after more than 1,000 McDonald's workers protested outside the company's suburban Chicago headquarters in May as part of the so-called “Fight for 15″ movement. About 100 protesters were arrested.

The Fight-for-15 movement seeks a $15-per-hour wage for fast-food workers and the right to form a union without retaliation. It is apparently the latter that has resulted in most NLRB complaints against the company.

One employment lawyer, Jon Hyman, a partner at Kohrman Jackson & Krantz in Cleveland, thinks McDonald's has no choice but to fight this. Hyman wrote on his Ohio Employer Law Blog that under the joint-employer theory, “the franchisor would not only share liability for the franchisee's unfair labor practices, but also its wage-and-hour violations, acts of discrimination and other employment sins, not to mention claims related to employees' negligence, such as slip-and-falls and food-related claims.”

A Long Battle Ahead?

If McDonald's fights, as it says it will, then the legal battle could rage on for years. The process, in general, first involves a hearing before an administrative law judge, then a possible appeal to the full board. And from there could be appeals to a U.S. circuit court of appeals and then to the U.S. Supreme Court.

“These cases are far from over,” Hyman agreed. “This issue is years from a resolution, but nevertheless warrants notice, as it serves as further evidence of the aggressive pro-union position the current iteration of the NLRB is putting forth.”

Sue Reisinger is a reporter for Corporate Counselor, a sibling publication of Franchising Business & Law Alert, and in which this article also appeared.

Richard Griffin Jr., general counsel of the National Labor Relations Board (NLRB), brought a new meaning to the phrase “Big Mac Attack” that could frighten franchisors across the country by threatening to jointly charge McDonald's USA over alleged workplace violations at its franchisees' stores. See, http://1.usa.gov/1pOdE61. And his expansion of parent liability could spread beyond fast-food chains to other industries.

McDonald's quickly indicated it would fight back. And critics immediately bashed the NLRB move as overreaching, drastic and “at odds with decades of precedent.”

McDonald's general counsel Gloria Santona referred questions to Terri Hickey, manager of U.S. media relations. Hickey, in turn, cited the fast food company's statement, which said: “This decision to allow unfair labor practice complaints to allege that McDonald's is a joint employer with its franchisees is wrong.”

The statement, signed by Heather Smedstad, senior vice president of human resources, went on to say: “McDonald's will contest this allegation in the appropriate forum. McDonald's also believes that this decision changes the rules for thousands of small businesses, and goes against decades of established law regarding the franchise model in the United States.”

Hickey also referred to statements from the International Franchise Association (IFA) and other business trade groups, saying: “This has implications for all franchised businesses ' not just restaurants.” Experts said it could include every business that uses the franchise model, such as 7-Eleven Inc., Hampton Inns hotels, Great Clips hair salons, H&R Block tax preparers and Dunkin' Donuts.

Griffin had signaled this move was coming. In a pending case involving a different company in May, the NLRB asked interested parties to file briefs on whether the agency should revisit its joint-employer standard. See, http://1.usa.gov/1lV9Vzy. All briefs were due by June 26.

Under previous case precedents, the standard requires the parent to have direct and meaningful control of a business. But Griffin is pushing for a looser standard that would consider the “totality of circumstances” to establish if the parent wields sufficient influence over working conditions.

Industry Reaction

IFA president and chief executive Steve Caldeira said in a Statement on NLRB Declaring McDonald's Corporation a “Joint Employer” that such a change would devastate the U.S. franchise model. “The recommendation that franchisors and their franchisees be designated as joint-employers is both wrong and unjustified,” he argued.

Caldeira went on to say that the NLRB was “yielding to intense outside pressure from labor unions led by the Service Employees International Union (SEIU), which is seeking to unionize franchise chains and undermine the proven, time-tested franchise business model.”

The SEIU couldn't immediately be reached for comment, and its website posted no comments about the NLRB announcement by the day after its issuance. ( Editor's Note: SEIU's site does carry a link to a statement issued by MassUniting, a group that describes itself as a “coalition of neighbors, community groups, faith organizations and labor united in the fight for good jobs, corporate accountability, and stronger communities.” MassUniting's release stated: “This determination carries widespread implications for the fast-food industry, and adds to extensive allegations made in class-action lawsuits filed earlier this year that the company is responsible for widespread wage theft. Time and time again, McDonald's has tried to sidestep workers' rights, inventing a make-believe world in which responsibility for wages and working conditions falls squarely on the shoulder of franchisees.” http://bit.ly/VmnFMt.)

Angelo Amador, vice president for labor and workforce policy for the National Restaurant Association, assailed the NLRB action. “The NLRB's change to the joint-employer standard is the latest example of a federal agenda aligned against small businesses,” Amador said. He continued: “From the recent recess appointments of officials to the NLRB who do not respect the contributions of small business to the economy ' struck down by the Supreme Court ' to proposing a rule allowing for 'ambush' elections, reducing the time to organize a union, the NLRB's actions are overreaching.”

But the NLRB general counsel made it clear that his office was looking at a pattern of labor complaints against the Golden Arches. Of 181 complaints against the company, 43 cases were found to have merit and another 64 are still pending investigation. “In the 43 cases where [the] complaint has been authorized, McDonald's franchisees and/or McDonald's USA LLC will be named as a respondent if parties are unable to reach settlement,” Griffin's announcement said.

The action comes after more than 1,000 McDonald's workers protested outside the company's suburban Chicago headquarters in May as part of the so-called “Fight for 15″ movement. About 100 protesters were arrested.

The Fight-for-15 movement seeks a $15-per-hour wage for fast-food workers and the right to form a union without retaliation. It is apparently the latter that has resulted in most NLRB complaints against the company.

One employment lawyer, Jon Hyman, a partner at Kohrman Jackson & Krantz in Cleveland, thinks McDonald's has no choice but to fight this. Hyman wrote on his Ohio Employer Law Blog that under the joint-employer theory, “the franchisor would not only share liability for the franchisee's unfair labor practices, but also its wage-and-hour violations, acts of discrimination and other employment sins, not to mention claims related to employees' negligence, such as slip-and-falls and food-related claims.”

A Long Battle Ahead?

If McDonald's fights, as it says it will, then the legal battle could rage on for years. The process, in general, first involves a hearing before an administrative law judge, then a possible appeal to the full board. And from there could be appeals to a U.S. circuit court of appeals and then to the U.S. Supreme Court.

“These cases are far from over,” Hyman agreed. “This issue is years from a resolution, but nevertheless warrants notice, as it serves as further evidence of the aggressive pro-union position the current iteration of the NLRB is putting forth.”

Sue Reisinger is a reporter for Corporate Counselor, a sibling publication of Franchising Business & Law Alert, and in which this article also appeared.