In a ruling that could set a precedent for many franchise
brands in restaurants and other service industries, the general counsel of the
National Labor Relations Board said Tuesday that McDonald’s Corp. could be
considered a “joint employer” along with its more than 2,000 franchisees in the
United States.
The recommendation published by The NLRB’s Division of
Advice means that the franchisor could be held liable for any wrongdoing or
laws broken by an owner-operator. Franchisees own and operate more than 90
percent of the brand’s more than 14,000 locations in the United States.
According to a report in the Associated Press, Oak Brook,
Ill.-based McDonald’s plans to contest the decision. The company had already
been the focus of a debate over such “vicarious liability” when employees sued
several franchisees as well as McDonald’s Corp. and McDonald’s USA in March,
alleging that the officials “systematically stole wages” by not paying overtime
or having crew members work off the clock.
At press time, McDonald’s Corp. did not respond to Nation’s
Restaurant News’ request for comment. Around the industry, however, the NLRB’s
ruling was criticized harshly as a threat to the rules and precedents that have
governed the practice of franchising in the United States for decades.
The National Restaurant Association said in a statement that
the advice memo misunderstands the franchisor-franchisee relationship and warned
that the precedent the recommendation sets could have a chilling effect on
restaurant growth via franchising.
“The NLRB’s attempts to overhaul the law will have dire
consequences to franchisees, franchise employees and the economy as a whole,”
the NRA’s vice president of labor and workforce policy, Angelo Amador, said in
a statement. “By making franchisors liable for their franchisees’ employment
practices and redefining individually owned franchises as ‘big business,’ the
NLRB would disrupt the franchisor-franchisee relationship and impede
entrepreneurship and restaurants’ ability to continue to create jobs,
particularly in an increasingly challenging economic environment.”
Steve Caldeira, president and chief executive of the
International Franchise Association echoed that sentiment in a statement
released today, noting that “franchisees and their employees do not work for
franchisors.” He added that franchise job growth, which had outpaced job growth
occurring outside of franchising, would “undoubtedly come to a screeching halt
if this decision is affirmed by the NLRB’s New York Regional Office.”
Rob Green, executive director of the National Council of
Chain Restaurants, agreed, saying in a statement that the recommendation was
“wrong-headed and will have a negative impact on the growth of small businesses
in America.”
On the other hand, leaders at Fast Food Forward, which has
organized strikes of quick-service workers since late 2012, praised the ruling
as an affirmation that McDonald’s and other large franchisors exert pressure on
their owner-operators to act in ways that do not uphold their workers’ best
interests.
“As the federal government’s determination shows, McDonald’s
clearly uses its vast powers to control franchisees in just about every way
possible,” Kendall Fells, organizing director for Fast Food Forward, said in a
statement. “It’s time the company put those same powers to work to do something
about the fact that its workers are living in poverty.”
Micah Wissinger, an attorney with Levy Ratner P.C. who sued
McDonald’s on behalf of employees in New York, added in a statement:
“McDonald’s can try to hide behind its franchisees, but today’s determination
by the NLRB shows there’s no two ways about it: The Golden Arches is an
employer, plain and simple. The reality is that McDonald’s requires franchisees
to adhere to such regimented rules and regulations that there’s no doubt who’s
really in charge.”
Worldwide, McDonald’s has more than 35,000 restaurants in
more than 100 countries, and more than 80 percent of those locations are
franchised.
Source: National
Restaurant News
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