NLRB Advances against McDonald’s

By issuing complaints against McDonald’s on December 19, 2014, the National Labor Relations Board gave unions a boost and further riled business groups. On July 29, 2014, the National Labor Relations Board’s (NLRB’s) Office of the General Counsel had set the labor and employment world on fire by authorizing these complaints, which needed Friday’s Board approval to move forward.

In essence, the Board itself has now preliminarily determined that the franchisor McDonald’s is a joint employer with McDonald’s franchisees and thus is liable for the actions of the franchisees, beyond just the opinion of the NLRB General Counsel.

In a press call, the International Franchise Association joined the U.S. Chamber of Commerce, National Restaurant Association, and National Retail Federation to address last Friday’s issuance of complaints against McDonald’s.                      

Robert Cresanti, Executive Vice President of Government Relations and Public Policy for the International Franchise Association explained that holding franchisors liable for the actions of their franchisees, as the NLRB General Counsel has proposed in an amicus brief, would move the franchise system toward large, corporate-owned outlets and away from independently owned operations.

On the call, Cresanti pointed out two important, real-world impacts such a decision would entail: 1) Minorities would be disproportionately disadvantaged as minority ownership is notably higher among franchise businesses than non-franchise businesses, and 2) Job growth would be constrained as business resources are sapped and franchise expansion curtailed.

Glenn Spencer, Vice President of the Workforce Freedom Initiative at the U.S. Chamber of Commerce, discussed how the direction of the NLRB leaves businesses with an uncertain standard for compliance.

Angelo Amador, Vice President & Regulatory Counsel with National Restaurant Association, noted the breadth of the issue goes far beyond McDonald’s and even far beyond restaurants.

David French, Senior Vice President of Government Relations for the National Retail Federation talked of the retail industry’s concern about the NLRB’s action today.

Indeed, the NLRB General Counsel’s brief in the BFI case speaks directly to franchising, staffing/temp agencies, and contracting/subcontracting. All of these industries must be concerned with the NLRB’s march against McDonald’s.

The International Franchise Association groused about what standard of conduct would be applied to business.  A thorough examination of the NLRB General Counsel Richard Griffin’s brief in the BFI case shows that Griffin intends to have the “typical” franchisor-franchisee relationship be considered a joint-employer relationship.

Griffin, in both his capacity as a Board Member and as General Counsel, has repeatedly pushed for thwarting precedent. In these joint-employer cases, Griffin proposes changing 30 years of precedent of “direct and immediate control” to add “indirect” or “potential” control.

Even beyond that, Griffin wants to add a fudge factor of “industrial realities” that would allow him to find joint employer status in all cases where more than one employer is deemed economically important in the business relationship. This amounts to a totality-of-the-circumstances test or an in-the-eye-of-the-beholder test.

NLRB Regional Offices themselves await a Board decision in the Browning Ferris Industries (BFI) case which is farther along in the Board’s process than the McDonald’s cases. The BFI case is widely expected to establish these tests for ruling on the McDonald’s cases.

One argument against the tandem of Friday’s issuance of complaints against McDonald’s and the expected Board action in the BFI case is the inherent unfairness of expecting businesses to have lived in the past according to a brand new standard.

Friday’s strong action against franchisors is particularly important, given a speech a month ago by General Counsel Griffin where he feigned some leniency toward franchisors who are protecting brand uniformity and quality. Griffin stated, “In that area we have a problem legally for our theory.”

If a franchisor as iconic as McDonald’s can be forcefully attacked, staffing/temp agencies and contractors have all the more reason for concern.

The NLRB press release states, “[O]f 291 charges filed since November 2012, 86 cases have been found meritorious, and therefore, … the Regional Offices, where meritorious charges were filed and not settled, issued complaints against the alleged joint employers today…  Additionally, of the 291 charges filed, 11 cases were resolved and 71 cases remain under investigation.” 

To begin the move against McDonald’s, the NLRB has scheduled “consolidated hearings in three Regional locations in the Northeast, Midwest and West to address violations that require remedial relief as soon as possible.  Absent settlement, the initial litigation will commence on March 30, 2015…”