Move is Win for Unions' Effort to Hold Franchisers Liable for Labor violations by Store Owners

By Melanie Trottman and Julie Jargon

Dec 19, 2014

The National Labor Relations Board has issued complaints naming McDonald’s  Corp. as a “joint employer” of workers at its franchisees, a win for unions in their effort to get the agency to hold franchisers liable for labor violations by store owners.

The complaints, issued Friday by the NLRB’s general counsel’s office, allege McDonald’s and certain franchisees violated rights of restaurant workers by making statements and taking actions against them for participating in nationwide protests and other activities to improve their wages and working conditions over the past two years.

The complaints stem from 291 charges filed with regional offices of the NLRB since November 2012. After finding merit in some of the charges, the NLRB’s general counsel’s office in July issued its opinion that the company should be considered a “joint employer” in the matters. The office warned then that it would issue the complaints if there was no settlement reached first.

Of the 291 charges, 86 have been found to have merit and 71 remain under investigation. About 10 of the charges with merit solely involve corporate-owned McDonald’s restaurants—not franchisees. In total, the agency is issuing 13 consolidated complaints that cover 13 NLRB regions.

The NLRB said its investigation found that McDonald’s, through its franchise relationship and its use of tools, resources and technology, “engages in sufficient control over its franchisees’ operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations” of labor law the agency enforces.

McDonald’s has said its franchisees—who own 90% of the company’s more than 14,000 U.S. restaurants—set wages and control working conditions within their restaurants.

It said in a statement Friday that it helps franchisees in part by providing access to resources related to food quality, customer service, and restaurant management. “These optional resources help entrepreneurs operate successful businesses. This relationship does not establish a joint employer relationship under the law—and decades of case law support that principle,” McDonald’s said.

The complaints, McDonald’s said, “improperly and dramatically strike at the heart of the franchise system,” and represent “overreach” by the agency. McDonald’s “will contest the joint employer allegation as well as the unfair labor practice charges in the proper forums,” the company said. It also said owners of its restaurants have informed the company that they too will contest the charges.

Linda Dunham, a franchisee who owns seven McDonald’s in New York and New Jersey, including one New York restaurant that was named in one of the complaints issued Friday, said the NLRB has been investigating the charges against that location for a while. She said she couldn’t discuss the specifics of the allegations but said defending her business has been financially and emotionally devastating. “It’s taken the focus off what we do every day,” said Ms. Dunham, who said she opposes McDonald’s being treated as a joint employer in her case because “I work for myself, not for McDonald’s.”

Several trade groups held a rare joint conference call Friday for media to voice their opposition to the complaints. The groups, including the U.S. Chamber of Commerce and the International Franchise Association, said allowing companies to be treated as joint employers with their franchisees would undermine the efficiencies of contracting and make companies liable for the labor actions of their franchise partners. They also said it would make their members more vulnerable to campaigns by union-backed groups.

Fast Food Forward, a group backed by the Service Employees International Union, has been organizing demonstrations at McDonald’s and other fast-food restaurants for two years, including one-day strikes in which fast-food workers have called for a $15 hourly minimum wage and the right to form a union without intimidation from their employers.

The group and unions say a change in joint-employer regulation is needed to address arrangements in which one company exercises control over wages and working conditions at another but has little responsibility for the workers.

Write to Melanie Trottman at eat0@eau0eav0eaw0 and Julie Jargon at eat1@eau1eav1eaw1