What the NLRB Actions Mean for McDonald’s and All Franchisors

What the NLRB Actions Mean for McDonald’s and All Franchisors

Brad Denton explains what effects the NLRB’s finding in their investigation of McDonald’s could have on the relationships in franchising.

Phoenix, AZ

On July 29, 2014, the National Labor Relations Board Office of General Counsel issued a finding that McDonald’s could be named as a joint employer respondent in NLRB cases. For the NLRB’s statement, click here. The finding was a result of NLRB investigations of allegations that franchisees and McDonald’s violated employees’ rights following protests by employees. The finding has caused a stir in the labor and franchise industries.

Following the July finding, the NLRB issued complaints against some McDonald’s franchisees and franchisor McDonald’s USA, LLC, as joint employers on December 19, 2014. For the NLRB’s statement about the complaints, click here. Litigation is scheduled to begin in some regions on March 30, 2015.

The complaints against McDonald’s and its franchisees include allegations that employees’ rights were violated when actions were taken against employees who had participated in protests about their employment.

What this means is that McDonald’s, as a franchisor, could be found liable for labor violations for its franchisees. This is causing concerns in the franchising community, because the NLRB has never made this sort of ruling before.
In the past, franchisors like McDonald’s have been able to claim that they are not responsible for the actions of franchisees, because franchisees control employment decisions. But if franchisors are held to be joint employers, they are liable for how those employees are treated.

The NLRB defined joint employer in Laerco Transportation. 269 NLRB 324 (1984). According to that decision, to be a joint employer “there must be a showing that the employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction.” Considering McDonald’s as a joint employer changes who can be held liable for labor violations and potentially extends liability past the previous definition of joint employers.

If the NLRB continues to recognize franchisors as joint employers, there could be serious effects on the franchise industry. Franchisors could face more liability and responsibility in labor actions. This could change the franchising relationship because of the increased legal exposure. It may also encourage franchisors to relinquish some of the control that they have over the employees of their franchises.

If you have questions regarding franchise law, contact the franchise lawyers at Gunderson, Denton & Peterson.

Written By Brad Denton

Gunderson, Denton & Peterson, P.C.

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