NLRB Decision on McDonald's Deals Blow to Franchising
The National Labor Relations Board notified McDonald’s this week it can be named a “joint employer” for workers in its franchisee-owned restaurants, meaning the franchisor could be held liable for labor violations in such restaurants even though other people own them.
McDonald’s plans to contest the decision, a senior vice president there said, calling it a “radical departure” from the past. The decision is a major blow to the business model of franchising, according to the International Franchise Association, which called the legal opinion "both wrong and unjustified."
“Franchisees and their employees do not work for franchisors," the IFA said in a statement from President and CEO Steve Caldeira. "If franchisors are joint employers with their franchisees, these thousands of small-business owners would lose control of the operations and equity they worked so hard to build."
As detailed in the August issue of Franchise Times, the controversy began in late 2012, when protests over wages and conditions for fast-food workers began around the country. Bills in Connecticut and New York, followed by minimum-wage proposals in Seattle and Chicago, sought to hold franchisors responsible for practices in franchisee-owned restaurants.
“Franchising has become ground zero for this debate. It’s scary times for franchising,” the IFA’s Matt Haller tells Franchise Times in the August issue. The IFA and franchisee plaintiffs sued the city of Seattle over their minimum-wage law, and presented opposition to the proposal in Chicago, as detailed in the August article.
The NLRB decision is a victory for the fast-food protesters, which are backed by the Service Employees International Union, and for advocates of the “fissured employment” theory. Under the theory, independent contractors, franchisees, subcontractors and others without a direct employer-to-employee relationship deserve special support because they are vulnerable to labor law abuse.
“We are expecting a strategic enforcement action by the Department of Labor centered on fissured employment theory,” saya Erik Wulff, an attorney for DLA Piper, in the August article.