A high-stakes legal dispute pitting McDonald’s Corp. against labor unions is set to enter a crucial phase this week, when the National Labor Relations Board takes up consideration of a case with major implications for franchise businesses.
An NLRB administrative law judge on Monday will begin weighing whether McDonald’s should be responsible for what employees say are poor working conditions and low pay at many of its franchise restaurants.
A finding in the affirmative would mark the first time that a major franchisor would be found culpable for labor violations at individual chains, following a finding last year by the NLRB’s lead attorney that McDonald’s should be treated as a “joint employer.”
The joint employer finding is among the most contentious actions taken by a labor board that has emerged as a political lightening rod under the Obama administration, and a top punching bag for business groups and congressional Republicans.
McDonald’s argues it is not a joint employer, contending that independent franchise owners operate the restaurants. Any ruling to the contrary would do grave harm to the franchise model, business groups say.
“It’s not going to stop at McDonald’s,” explained Elizabeth Milito, senior legal counsel of the National Federation of Independent Business. “This is really an assault on the entire franchise business model."
McDonald’s accuses the labor board of “mirroring the union’s position” and placing a target on the company's back.
“As we have said previously, the National Labor Relations Board’s decision to involve McDonald’s in its actions against our independent franchisees improperly strikes at the heart of the franchise system — a system that creates economic opportunity, jobs and income for thousands of business owners and their employees across the country,” the company said in a statement.
But critics allege McDonald’s is, in fact, controlling the operations from a distance by instructing franchise owners on everything from their employees' schedules to what they should say to customers and how they fold sandwich bags — claims the cheeseburger chain adamantly disputes.
“McDonald’s is the boss,” said David Dean, an employment lawyer with James & Hoffman PC. “It shouldn’t be hiding behind its franchisees.”
The consolidated case now before the NLRB stems from dozens of complaints of alleged retaliatory actions taken by McDonald’s franchises against employees who participated in nationwide fast food protests.
In November 2012, about 200 workers protested against McDonald’s and other popular fast food restaurants in New York City. From there, the fast food protests took off and spread to more than 200 cities across the country.
The fast food workers are calling for no less than $15 an hour and the opportunity to organize a union.
Some McDonald’s franchises responded by cutting back hours, and in some cases, firing workers who participated in the strikes, the complainants allege.
Labor lawyers say McDonald’s shouldn’t be given a “free pass” when its franchisees cross the line.
“There is exactly one entity that’s in a position to fix the problem,” Dean said, alluding to McDonald’s Corp.
But McDonald’s says it focuses on promoting the company’s brand and does not get involved in the day-to-day operations at franchise restaurants.
“McDonald’s does not direct or co-determine the hiring, termination, wages, hours, or any other essential terms and conditions of employment of our franchisees’ employees — which are the well-established criteria governing the definition of a ‘joint employer,’ ” the company said in a statement.
Last summer, NLRB general counsel Richard Griffin said he would hold McDonald’s corporation jointly responsible for the actions of its franchises.
In December, Griffin followed up by issuing 19 complaints against McDonald’s.
The complaints will be considered during hearings in New York, Los Angeles and Chicago, beginning Monday.
The resulting decision could then be appealed to the NLRB’s five-member board in a case that would move next to the federal courts — and could eventually be decided by the Supreme Court.
“I think all businesses should recognize this is bigger than a McDonald’s problem,” said Michael Lotito, an employment and labor attorney and co-chairman of Littler Mendelson's conservative Workplace Policy Institute.
“The labor board is embarking on a process that fundamentally redefines who an employer is and who an employee is,” he added.
The NLRB’s consideration of those issues extends well beyond the golden arches.
Separately, the labor board is weighing another case — known as Browning-Ferris — that experts say could have an even greater affect on the joint employer standard.
Under the current standard, a company is considered a joint employer if they are directly involved in hiring, firing or setting the pay and schedules for those employees. But the NLRB is weighing a change that could put more companies on the hook for the employees of their franchisees, contractors, vendors and suppliers.
A company that outsources to a security firm, construction company or janitorial service, for example, could be equally responsible for the employees of their contractors, employer advocates say.
“What that means is essentially anyone could be a joint employer,” said Glenn Spencer, vice president of Workforce Freedom Initiative at U.S. Chamber of Commerce. “There’s no question it would make franchise operations much more difficult.”
But that may not be such a bad idea, said Sarah Leberstein, senior staff attorney for the National Employment Law Project, who pointed out that companies often outsource jobs to skirt their responsibility.
“Companies are free to outsource their work, but they can’t outsource their responsibilities for their employees,” Leberstein said. “Without joint employer responsibility, this type of corporate outsourcing can result in a lack of responsibility for workplace conditions.”