|August 15, 2014|
Previously published on August 7, 2014
The NRLB’s General Counsel, Richard F. Griffin, Jr., authorized complaints against McDonald’s franchisees and McDonald’s, USA, LLC (McDonald’s) as joint employers. This decision marks a major departure from prior policy, and if upheld, could represent a real threat to the entire fast-food industry. In actuality, this decision could signal a far-reaching move extending beyond the fast-food industry to hold businesses that use contractors or temp agencies liable for violating the NLRA.
General Counsel Griffin announced that merit was found in 43 of 181 cases alleging various unfair labor practices against McDonald’s and its independent franchisees. This included claims that McDonald’s and its franchisees illegally fired, threatened and/or otherwise penalized workers for engaging in pro-union activities. General Counsel Griffin also announced that 68 of the cases were without merit, while 64 cases were still under investigation. If the parties cannot reach settlement in these cases, complaints will issue and McDonald’s will be named as a joint employer respondent.
McDonald’s has made it clear that it will contest this decision and believes there is no legal merit for its liability. Specifically, McDonald’s stated, “[t]his decision to allow unfair labor practice complaints to allege that McDonald’s is a joint employer with its franchisees is wrong. 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.” As a result, McDonald’s will most likely dispute the “joint employer” decision on the grounds that it does not dictate or participate in hiring, wages or other employment decisions.
This decision may well be the result of an NLRB emboldened by recent comments made by U.S. Supreme Court Justice Kagan in her dissent of the recent Harris v. Quinn case. In that case, Justice Kagan expressed her opinion that Illinois would fall under the definition of a joint employer for certain home healthcare workers. It is notable that the state of Illinois appears to have had much greater control over those workers employment decisions than McDonald’s has had for the employees of its franchisees.
It is also worth noting that franchise owners have come under the scrutiny of David Weil, the Wage and Hour Administrator at the Department of Labor (DOL). In a DOL report, Weil claimed that the franchise business model could contribute to wage and hour noncompliance. He later clarified that his concern is not with the business model itself, but rather, concerned that some franchisors might use franchisees to insulate them from liability and to break the law.
It is clear this is a major decision with potentially huge implications. It will be intriguing to see what comes next. Employers who utilize franchisees, contractors or temporary employees hired through agencies should watch closely as this may ultimately affect their liability as well as their potential future relations with labor unions.