Since 2012, McDonald’s Corporation and the NLRB have been embroiled in the question of what joint employment is. The question is over whether the McDonald’s Corporation as a franchisor could be held responsible for allegedly wrongful employment practices of its franchisees.
In 2012, some of its franchisees disciplined non-union employees involved in protests over living wages. Some McDonald’s store employees left work or did not come in to work to protest over wages, benefits, and terms and conditions of employment. These issues are protected activity under the National Labor Relations Act (NLRA) and when workers complained about employer disciplinary actions in response to worker absences and such, the National Labor Relations Board (NLRB) filed unfair labor practice charges against the franchisees and McDonald’s Corporation.
The NLRB would have stuck to just charging the franchisees under previous NLRA interpretation. But the more radical Obama NLRB sought to draw the whole corporation into the labor charge and hold the entire corporation responsible for the actions of a franchisee. This was a big change to NLRA interpretation and a big challenge to franchisor-franchisee law.
Rather than continue fighting this issue, McDonald’s Corporation is seeking a settlement by the more employer-friendly Trump NLRB in an attempt to avoid years of litigation and also avoid potentially having a court ruling that would increase corporate liability for alleged wrongdoing by franchisees.
An adverse decision by a court against McDonald’s is recognized as having potentially much broader effect. Burger shops are not the only franchise operation out there. This would impact hotels chains, cleaning companies, rental car agencies, and real estate agencies to name a few operations using the franchise model. If McDonald’s were to lose in Court, large corporations using a franchisee model would have to become a lot more involved in the day to day operations of their franchisees.
McDonald’s, and by proxy the franchise industry, seeks to circumvent the possibility of this kind of loss by accepting a settlement with the NLRB. Current terms of the settlement have McDonald’s accepting no responsibility for wrongdoing but making some restitution and reinstatement of the employees fired or disciplined at the time.
The NLRB has already moved to change its interpretation of the NLRA by deciding a case called Hy-brand, which again changed the joint employer test that had been adopted by the NLRB in its now famous Browning-Ferris decision that broadened the definition of what it took to be a joint employer. In a subsequent ruling based upon a finding that one of the board members had a conflict of interest, the Hy-Brands decision was vacated leaving Browning-Ferris as the remaining temporary law. The current NLRB will undoubtedly look for another Hy-Brand like case to re-establish its contemporary rule on this. But should the Washington Administration change in 2020 and swing to a pro-labor position, the rule could change again and the traditional rules governing franchisee-franchisor could be challenged.
Though settlement of this case by McDonald’s and the NLRB may seem practical, it has caused many pro-labor proponents to yell foul. No less than Senator Elizabeth Warren (D - Mass) wrote to the NLRB’s General Counsel Robb to protest that this settlement was nothing but a pretext to avoid addressing the legal question of whether U.S. law on joint employment should be changed to hold corporations liable for the acts of their franchisees.
As of right now, McDonald’s and the NLRB are waiting for an administrative law judge to approve the settlement.
The settlement of this case follows a U.S. Supreme Court decision handed down January 8, 2018 to let stand a 4th Circuit Court of Appeals decision. Rather than adopting one joint employer test for the country, it upheld previous law allowing differing joint employer standards that reside in various federal courts to remain. By one account, this decision may be in order to allow Congress or the Department of Labor to issue new rules as the National Labor Relations Board is doing with its reconsideration of Browning-Ferris.
Sources: Bloomberg, McDonald’s Wants to End Potential Landmark Workplace Case 3/19/2018; Inc. This Labor Ruling Might Be the End of McDonald's as You Know It; Law 360, NLRB, McDonald's Joint Employer Deal Hinges on Details (3/20/2018); Holland & Hart Supreme Court Denies Review of FLSA Joint-Employer Test (2/25/2018)