NLRB Rules McDonald’s Is Not Responsible For Franchisee Actions

NLRB Rules McDonald’s Is Not Responsible For Franchisee Actions

| Dec 18, 2019 | Employment Issues For Employers |

The National Labor Relations Board (NLRB), the agency that enforces some aspects of U.S. labor law, has told a federal administrative law judge to move forward with the approval of a settlement in a longstanding case against McDonald’s. Union workers had sued McDonald’s after numerous franchises were accused of labor law violations.

In 2015, the Service Employees International Union sued the McDonald’s Corporation and the franchisees, alleging that the franchisees had retaliated against workers who sought to take collective action. Specifically, these workers supported the Fight For $15 movement, which advocates for a $15 per hour federal minimum wage. The suit accused the franchisees of cutting workers’ hours and assigning them less favorable work after they attended protests.

Franchisors may sometimes be joint employers with their franchisees

A crucial question in the case was whether McDonald’s corporation exerted sufficient control over the actions of the franchisees that it could reasonably be held liable for their conduct. If it did, and the complaint alleged that it did, McDonald’s could be held to be a “joint employer” of the workers.

After a change in administration, however, the NLRB changed its position. Just days before the three-year trial was concluded, the NLRB suddenly proposed a settlement of the case. The administrative law judge, however, rejected the settlement offer, calling it “manifestly unreasonable.”

Now, an NLRB panel has overruled that judge and ordered her to approve the settlement. Because administrative law judges are employees of the agencies they are associated with, the agencies sometimes have the authority to overrule them.

The settlement requires the franchisees to set up a $250,000 fund to pay damages to the workers who sued. It does not require McDonald’s to make any changes.

This is not the only case in which workers and unions have sought to hold McDonald’s liable as a joint employer. Several lawsuits accuse the corporation of exerting sufficient control over franchises to be partially responsible for how franchisees treat their workers.

According to NPR, about 90% of the 14,000 McDonald’s restaurants in the U.S. are operated by franchisees. The McDonald’s Corporation’s position is that they are entirely independent businesses and make their own decisions about all personnel matters.

The decision comes as the NLRB also works to revoke the Obama administration’s definition of joint employer, which held more generally that some franchisors can be held liable for labor violations by their franchisees and contractors. A new definition in the form of a final rule is expected sometime next year.