Labor Law Liability Blurs in McDonald’s Case

The NLRB charged McDonald’s as a “Joint Employer” with franchisees in alleged labor violations by illegally threatening worker advocating for higher wages and improved working conditions.

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NLRB Charges Add Labor Law Liability to Franchisors for Franchisee Violations

The National Labor Relations Board (NLRB) filed complaints against McDonald’s corporate and dozens of McDonald franchise operations for illegal termination and intimidation of workers who were attempting to organize for better wages and working conditions.

Since the nationwide fast food-worker strikes and demonstrations in 2012 (the Fight for 15 movement), the NLRB leveled more than 300 charges of unfair labor practices against McDonald’s franchisees and 10 corporate-owned McDonald’s facilities.

The NLRB alleges that McDonald’s restaurants retaliated against workers who participated in demonstrations or advocated for improved pay and working conditions – actions that are considered protected concerted activity under Section 7 of the National Labor Relations Act (NLRA). The charges of retaliation include reductions in hours, discharges, threats, surveillance, interrogations, and over-broad restrictions on communication with union representatives or with other employees.

The NLRB found that McDonald’s corporate has “sufficient control” over franchisee operations that makes them liable for violations of the NLRA as a “joint employer” with franchisees. According to Politico, this is the first time McDonald’s has been held responsible for labor violations leveled against independent owners and franchisees.

McDonald’s has more than 15,000 restaurants in the U.S., but only 10 percent are owned and operated by McDonald’s corporate.

The complaints will be considered by administrative law judges beginning in March 2015 but can then be appealed to the five-member NLRB.

The NLRB’s General Counsel advised the NLRB to apply the joint employer standard based on “industrial realities” wherein one company exerts enough influence over the operations of another business to effectively have control over labor decisions.

Opposition to the Joint Employer Classification

McDonald’s is promising a strong counterattack against their inclusion in the charges as a joint employer, which they see as a threat to the entire franchise system, and they’re not alone. Other organizations have expressed concern about the potential for undermining the distinct separation of franchise standards and the day-to-day operational liability afforded by franchisor-franchisee agreements.

The U.S. Chamber of Commerce is among opponents of the McDonald’s classification as a joint employer:

“The complaint issued against McDonald’s by the NLRB determining that McDonald’s corporation should be considered a ‘joint employer’ is cause for concern as it undermines settled law…This complaint upends existing law and is part of a larger agenda at the NLRB to overturn the joint-employer standard.”

International Franchise Association Executive Vice President of Government Relations & Public Policy Robert Cresanti took an even stronger stance:

“The Board has effectively legislated a change to the definition of who an employer is, which will impact hundreds of thousands of businesses. Unelected government bureaucrats, let alone one prosecutor, should not have such power.”

Advice for Franchisors

Keeping your distance from franchisee operations is the best course of action for franchisors according to hospitality attorneys Davis Wright Tremaine LLP.

“…completely distance all operating advice from anything that could remotely be interpreted as suggesting or recommending particular employment practices. Do not provide template employee handbooks; do not threaten to terminate a franchisee who fails to discipline or fire an errant employee for violating brand standards. Instead, use the threat of terminating the franchise agreement to encourage franchisees to make their own decisions about how to achieve full compliance with system standards.”

GovDocs recommends that all employers take time to audit their labor law postings – city, state, and federal – to ensure that each business location displays the most current and required workplace notices for employees. Out-of-date or missing postings are “low hanging fruit” for workers who are on the look-out for workplace violations.

Subscribers to our labor law news alerts receive an additional 20 percent discount for GovDocs Labor Law Poster Compliance packages using coupon code BLOG20. For larger employers with multiple locations, contact us for volume discount pricing on labor law posting compliance products and services.

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