McDonald’s Is Joint Employer with Franchisees: National Labor Board

December 21, 2014

McDonald’s Corp. wields enough control over its franchisees that it should be jointly responsible for the working conditions of their employees, according to charges by the U.S. labor board critics say threatens to upend the fast- food industry.

The National Labor Relations Board’s general counsel, who acts as a prosecutor in filing complaints for labor-law violations, said he would proceed with 13 cases involving 78 allegations against McDonald’s and some affiliated store owners.

The action is a win for unions seeking to get McDonald’s, the world’s largest restaurant chain, and other fast-food companies to negotiate on wages and benefits.

A group for franchisees criticized the action and a Republican lawmaker vowed to introduce legislation to stop the labor board.

Lisa McComb, a spokeswoman for Oak Brook, Illinois-based McDonald’s, said in a statement that the board’s actions “dramatically strike at the heart of the franchise system.”

The charges brought today include disciplining employees, reducing their hours and “other coercive conduct” in response to union organizing in support of a higher minimum hourly wage.

The complaint defies “plain old common sense” and undercuts legal precedent over the definition of an employer, said U.S. Senator Lamar Alexander, a Tennessee Republican in line to lead the Health, Education, Labor and Pensions Committee next year.

‘Absurd Action’

“If the board continues down this path, they could destroy the dream of small-business ownership” for 770,000 franchisees, Alexander said in a statement. He said he plans to introduce a bill to address “this absurd action.”

The complaints are being closely watched by companies and their affiliated restaurants as a potential expansion of how the board defines who is a so-called joint employer. Including the corporation in the case would make it responsible for how employees at local franchises are treated.

Robert Cresanti, executive vice president of government relations for the International Franchise Association, said in conference call with reporters that the action was “a devastating blow for the industry.”

Legal Costs

He said it would raise the liability of franchisers like McDonald’s, potentially discouraging companies to expand. Michael Lotito, a lawyer representing the franchise association, said it would raise legal costs for franchisees by encouraging more union organizing activity.

McDonald’s has said its franchisees set wages and control local working conditions. Workers said the corporation controls a number of aspects of how local restaurants operate.

“The complaint validates what workers have been saying over and over again — that McDonald’s requires franchisees to adhere to such regimented rules and regulations that there’s no doubt who’s really in charge,” said Micah Wissinger, an attorney at Levy Ratner who brought the case on behalf of McDonald’s workers in New York City.

In addition to the McDonald’s charges, companies are also awaiting an NLRB decision on a related case involving the waste disposal company Browning-Ferris Industries Inc. that could revise a three-decade-old definition of joint employer.

Richard Griffin, the board’s general counsel, has asked in that case that companies with indirect control over employees of another company be liable for working conditions under U.S. labor law.

That decision would apply to more companies than franchisers to include temporary staffing agencies and other subcontracting businesses.

Griffin had announced in July his intention to bring charges against McDonald’s in addition to its franchisees unless the company and the local operators settled their cases.

The step announced today reflects a lack of any settlement.

The statement from the general counsel’s office said the litigation would begin on March 30, including hearings at three regional NLRB offices.

–With assistance from Leslie Patton in Chicago.

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