NLRB’s McDonald’s Ruling Raising Liability Concerns for Franchise Operators

By Amanda Becker | July 31, 2014

Under Democratic President Barack Obama, the U.S. National Labor Relations Board has been taking a stance on workplace relations that has employers, industry groups and Republican lawmakers voicing alarm.

NLRB General Counsel Richard Griffin announced on Tuesday that McDonald’s, not just its franchisees, can be liable for alleged labor law violations. McDonald’s is the world’s largest restaurant chain.

If the five-member, Democrat-controlled NLRB board agrees with Griffin, the agency’s top prosecutor, corporations that may be far removed from day-to-day personnel decisions made by franchisees and contractors will be exposed to new legal risks, critics said.

“I just don’t see him staking out such a public position on this without some level of confidence that the board majority is going to side with him or at least move the ball heavily in that direction,” said Seth Borden, a labor lawyer at McKenna, Long & Aldridge.

Workers’ groups and labor unions say such a change will compel corporations to take responsibility for working conditions that are ultimately under the companies’ control.

“Technological advances allow McDonald’s to watch over its franchisees’ operations like a hawk, in ways that go well beyond simply protecting its brand. The NLRB General Counsel determination leaves no doubt that McDonald’s is an employer and puts an end to it self-serving charade that it is not,” said Catherine Ruckelshaus, general counsel at the National Employment Law Project, an advocacy group for low-wage workers.

JOINT-EMPLOYER STANDARD

The board announced in April that it was considering changing its 30-year-old “joint-employer” standard and asked interested parties to weigh in on whether it should and, if it did, what the appropriate standard might be. It has yet to make a decision.

Griffin’s announcement that McDonald’s could be liable for 43 alleged instances of employee rights violations departs from the board’s current standard that typically shields from liability franchisors and other business entities that do not employ workers directly.

In prosecutorial decisions and briefs filed with the board, Griffin has said he believes the board should abandon its current standard for one that reflects the “economic reality” of employment relationships.

Such an expansion could lead to board findings of joint liability for franchisor and franchisee, contractor and contractee and even an entity’s use of a vendor, legal experts said.

Employers and business groups see a union-propelled push that would lead to nationwide organizing campaigns. They fear businesses could be swept after the fact into labor disputes and union negotiations over which they have little influence.

FIRST STEP

Griffin’s announcement is the first step in a process that “threatens to disrupt a well-established legal standard,” said Randy Johnson, of the U.S. Chamber of Commerce, a business lobbying group. McDonald’s has said it will contest the action.

Republicans also were critical. John Kline of Minnesota, the top Republican on the workforce committee of the U.S. House of Representatives, accused Griffin of trying to rewrite the franchise model that workers, employers and consumers have known for decades.

Appointed general counsel by Obama, Griffin previously had been a member of the NLRB board.

His announcement was a preliminary step in a lengthy process for handling charges filed by workers with the NLRB. Only charges deemed to have some merit prompt the general counsel’s office to bring a complaint. Then an agency administrative law judge (ALJ) presides over a trial.

ALJ decisions go to the NLRB’s board for consideration. The board’s decisions can be appealed in federal appeals courts, with each side able to argue its case.

The NLRB oversees union elections and polices labor disputes in the private sector. Its board is appointed by the president and confirmed by the Senate, with three members from the president’s party.

The board’s policy decisions tend to shift to reflect the ideology of the party that controls the White House, with Democrats traditionally aligning with organized labor and Republicans with business.

(Additional reporting by Lisa Baertlein; Editing by Kevin Drawbaugh and Howard Goller)

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Latest Comments

  • July 31, 2014 at 5:00 pm
    Jules says:
    Normally I wouldn't harp on this, but when the article makes a point of stating at the end that it had TWO EDITORS I can't let it slide: "NLRB board" is redundant and annoying... read more
  • July 31, 2014 at 4:45 pm
    Rusty says:
    Besides creating another regulation it is also the perfect match of anti-business ideology and a deeper pocket resource for lawsuits that will ultimately enrich plaintiff atto... read more
  • July 31, 2014 at 4:44 pm
    vince phillips says:
    What would be of interest is an article regarding the judicial invalidation of the NLRB's recess appointments. In other words, can an NLRB decision be considered as valid giv... read more
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