In a potentially far reaching decision rendered today, the National Labor Relations Board (NLRB) has permitted 43 claimants to proceed with claims against the McDonald’s USA, LLC, franchisor of the McDonald’s restaurant chain, for unfair labor practices allegedly committed by McDonald’s franchisees. The decision followed a lengthy investigation into 181 complaints that workers were allegedly terminated, threatened, or suspended because of their efforts to unionize. The NLRB’s decision is predicated on a trendy new legal theory that seeks to hold franchisors strictly liable for the conduct of franchisees as an employer, even though the franchisor does not hire, fire, pay, or supervise franchisees’ employees. Instead, plaintiffs and regulators seek to saddle franchisors with responsibility based on the franchise system itself, which requires franchisors to implement basic controls to preserve and protect the trademark.
In a statement issued by Heather Smedstad, senior vice president of human resources, McDonald’s contested the NLRB’s decision strenuously, noting that the “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.”
The statement goes on to note that “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.” If true, then McDonald’s does not meet the definition of a joint-employer, because it does not control the essential terms and conditions of employment for its franchisees’ workers. See TLI, Inc., 271 NLRB 798 (1984); Laerco Transportation, 269 NLRB 324 (1984) (noting that essential terms and conditions of employment include hiring, firing, discipline, supervision and direction of employees).
The NLRB’s decision may foreshadow events to come, as the agency put out a public call seeking input on whether it should change the long-standing “joint-employer” definition in an appeal from an administrative decision rendered in Browning-Ferris Industries of California, Inc., et al., v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters.
A decision that greatly expands the definition of what constitutes a “joint-employer” in Browning-Ferris appears to be in the offing, which will be a serious blow to franchising as a business model.