The National Labor Relations Board issued a complaint against McDonald’s Corp. Friday, saying it was jointly responsible for labor violations at its local franchise restaurants.
The charges have major implications for businesses because they run counter to the common understanding of how business franchises work — that the individual franchise is a private, legally separate entity from the parent company. The complaint issued by the NLRB’s general counsel said McDonald’s franchise system means that the local businesses aren’t truly private and the corporation can be held liable for their actions.
“The complaints allege that McDonald’s USA, LLC and certain franchisees violated the rights of employees working at McDonald’s restaurants at various locations around the country by, among other things, making statements and taking actions against them for engaging in activities aimed at improving their wages and working conditions, including participating in nationwide fast food worker protests about their terms and conditions of employment during the past two years,” the NLRB said.
The NLRB is the entity that enforces federal labor law. The complaint, issued by the board’s general counsel, folds together 13 individual complaints comprising 78 charges of labor violations at McDonald’s restaurants across the country. The full five-member board will hold a trial on the charges in March.
“McDonald’s is disappointed with the board’s decision to overreach and move forward with these charges, and will contest the joint employer allegation as well as the unfair labor practice (ULP) charges in the proper forums,” the company said in a statement. “These allegations are driven in large part by a two-year, union-financed campaign that has targeted the McDonald’s brand and impacted McDonald’s restaurants.”
McDonald’s says 80 percent of its 2,500 domestic franchise restaurants are privately owned. Critics argue, though, that the franchiser-franchisee relationship is not an equal one.
“Given that McDonald’s remains manifestly in control of franchisees’ working conditions, it’s common sense that the company should share legal responsibility with franchisees when it comes to securing workers’ rights on the job,” Mark Barenberg, a Columbia Law School professor, said in a conference call organized by the National Employment Law Project.
Business groups said they would contest the charges vigorously. Robert Cresanti, executive vice president of the International Franchise Association, read the NLRB the riot act in a conference call with reporters, arguing the complaint was really an effort to make it easier for unions to organize franchised businesses by allowing them to target the corporate parent rather than individual businesses.
NLRB General Counsel Richard Griffin is a former top lawyer for the International Union of Operating Engineers.
“While the IFA is clearly disappointed, we are not surprised. The ongoing attacks on franchised business have been relentless and clearly coordinated by organized labor. With this announcement, the NLRB is making it clear that it is carrying water for the SEIU,” Cresanti said. SEIU is the Service Employees International Union, which has been trying to organize the fast-food industry.
“For us, this is really the nightmare before Christmas,” he added.
The case could mean that any franchise could be held legally liable for labor law violations at franchises. Business groups warn that the liability issues will force corporations to either limit their franchising or assert more control over the operations of individual franchises. That could damage the economy by cutting off one of the ways that entrepreneurs become new business owners.
“What the general counsel has now done is inject a huge amount of uncertainty into the equation. We don’t know what the legal standard is … People aren’t going to know how to set up their business,” said Glenn Spencer with the Workforce Fairness Institute, which is affiliated with the U.S. Chamber of Commerce.
