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Latest News - January 2015

January 13, 2015
Nicklaus: McDonald's labor case is big test for franchise model
By: David Nicklaus

When you order a burger and fries at McDonald’s you probably don’t think you’re patronizing a small business, but in most cases you are.  Independent franchisees own 90 percent of the chain’s 14,000-plus U.S. restaurants, and the franchise model has been critical to the chain’s success. Decisions about advertising and new menu items are made at headquarters in Oak Brook, Ill., but burger-flippers are hired and fired by local owners.


Except that the National Labor Relations Board says they’re not.  Just before Christmas, the agency hit McDonald’s with 78 charges alleging violations of labor law.  Although most of the actions were taken by franchisees, the NLRB says McDonald’s should be considered a joint employer because it “engages in sufficient control over its franchisees’ operations.”


At a McDonald’s on Lindell Boulevard in St. Louis, for example, one complaint alleges that franchisee Rivers Holding improperly fired an employee in September, after a round of union-led protests by workers demanding higher wages. The worker was fired because she “assisted the union and engaged in concerted activities,” the NLRB contends.


Had the board simply gone after Rivers Holding, and franchisees in other cities who took similar actions, this would be another routine labor-management skirmish. Individual workers whose rights were trampled would have a chance to win redress, but unions would be no closer to organizing the fast-food industry.  By seeking to make McDonald’s a joint employer, the NLRB raised the stakes. If McDonald’s is found responsible for all of its franchises’ workers, unions may have a shot at organizing the whole chain.


McDonald’s, for its part, says the NLRB complaints “strike at the heart of the franchise system.” It promises to fight the joint-employer designation.  That could make for a long legal battle, says Marion Crain, a law professor and vice provost at Washington University. If the NLRB holds McDonald’s responsible for labor law violations and the company appeals, she says, it’s the sort of dispute that could easily go all the way to the Supreme Court.


The concept of a joint employer isn’t a novel one in labor law.  Farms have been found liable for the activities of farm-labor contractors, and building managers for violations committed by janitorial services contractors.  “A franchise is a contract, so this is a logical extension,” Crain says.  The question is whether the franchise contract, which covers such things as cleanliness and service standards, also determines how a franchisee treats its workers.




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