On Friday, December 19th the National Labor Relations Board’s (the “NLRB”) Office of the General Counsel issued complaints against McDonald’s franchisees and their franchisor, McDonald’s USA, LLC, as “joint employers” (the “McDonald’s entities”). The NLRB’s announcement continues its aggressive push to hold franchisors responsible for the labor relations violations of separately owned and operated franchisees.
The complaints arise out of 291 unfair labor practice charges filed by employees participating in nationwide protests against the McDonald’s entities advocating for improved wages and working conditions. Of the 291 charges, the NLRB has issued 86 complaints alleging that the McDonald’s entities engaged in discriminatory discipline, reductions in hours, and discharges. The NLRB has scheduled these complaints for hearings beginning on March 30, 2015.
So why should employers everywhere – but especially those that utilize franchise, independent contractor, or other non-traditional workplace models – be concerned? These complaints reflect the NLRB’s attempts to overhaul its 30-year standard for establishing a “joint employer” relationship. The NLRB’s current “joint employer” standard treats two separate companies as “joint employers” if the “indirect employer” joined with the direct employer to exercise direct and immediate control over the employees at issue. While this is historically a fact intensive determination, the decision typically boils down to the ability to hire, fire, discipline, supervise, and direct the employees in question. Under the current standard, a franchisor, like McDonald’s USA, would not typically meet the criteria to be a joint employer. The recent complaints send the message that the NLRB intends to ease that standard considerably.
Such a significant change in the “joint employer” standard could have major consequences for employers, including:
- Increased union organizing power, with the ability to pull from a larger pool of employees
- Increased liability for the joint employer for labor violations committed by a direct employer
- Required joint employer participation in collective bargaining
As employers with potential “joint employer” relationships watch the battle between the NLRB and the McDonald’s entities unfold, they should consider what actions they can take to avoid creating relationships that may draw NLRB scrutiny under a new standard. These steps include creating distance from the direct employers when it comes to the management of employees and employment decisions, such as setting wages, establishing employment policies, and providing template or sample employee handbooks. We will keep you updated as this important issue continues to develop.