Minimum-Wage Activists See Opportunity in McDonald’s Decision

July 31 (Bloomberg) -- Steve Caldeira, Chief Executive Officer at International Franchise Association, talks with Betty Liu about how the labor ruling against McDonald’s harms franchise owners instead of the corporation. He speaks on “In The Loop.”

Minimum-wage activists seized on a decision against McDonald’s Corp. (MCD) by the National Labor Relations Board’s general counsel yesterday, saying the move may make it easier to unionize workers and ultimately raise wages.

In cases involving restaurants allegedly violating the rights of McDonald’s workers, General Counsel Richard Griffin found that the parent company can be considered an employer, along with franchise owners. That means if the parties in the disputes can’t reach a settlement, McDonald’s would be held jointly responsible, the NLRB said yesterday in a statement.

While only the first step in a long legal process, the decision was celebrated by labor groups and decried by the retail industry, which said it threatens a system that employs millions of Americans. If upheld, the determination may bring McDonald’s to the table during collective bargaining, making unions more powerful. McDonald’s also could face more scrutiny, said Christine Owens, executive director for the National Employment Law Project, an advocacy group for low-wage workers.

“They should be held accountable, along with their franchisees, for practices that violate the law,” she said in a statement.

If the labor board agrees with the general counsel’s determination, more workers could be able to organize as part of the same union, expanding their clout, said Gary Chaison, a labor professor at Clark University in Worcester, Massachusetts. In the past, unionizing efforts may have been limited to single stores or at McDonald’s that are owned by the same franchisee, he said. The company has more than 14,200 U.S. restaurants.

Photographer: Luke Sharrett/Bloomberg

Minimum-wage activists seized on a decision against McDonald’s Corp. by the National Labor Relations Board’s general counsel yesterday, saying the move may make it easier to unionize workers and ultimately raise wages. Close

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Photographer: Luke Sharrett/Bloomberg

Minimum-wage activists seized on a decision against McDonald’s Corp. by the National Labor Relations Board’s general counsel yesterday, saying the move may make it easier to unionize workers and ultimately raise wages.

‘Common Thread’

The general counsel’s decision “tries to establish a common thread” that runs through a fast-food franchise, and it would probably apply to other fast-food chains, Chaison said in an interview.

Nine out of 10 of McDonald’s U.S. restaurants are owned by franchisees. That means individual businesspeople pay a percentage of their sales to the parent company, which manages the brand and image. McDonald’s, which will challenge the decision, has said it has a hands-off role when it comes to store employees. Treating the company as a joint employer would unfairly change the rules for thousands of small businesses, along with other corporations that rely on franchising, Oak Brook, Illinois-based McDonald’s said.

“This decision to allow unfair labor practice complaints to allege that McDonald’s is a joint employer with its franchisees is wrong,” Heather Smedstad, the restaurant chain’s senior vice president of human resources, said in a statement. “McDonald’s will contest this allegation in the appropriate forum.”

Union Activity

The NLRB’s general counsel has been reviewing cases in which employees claimed McDonald’s fired or suspended them for joining labor unions. By including the company in their charges, the workers said the corporate parent should be held responsible for the actions of individual restaurants.

Worker groups say that McDonald’s monitors store employees more closely than it contends.

Richard Eiker, who mops floors and does other maintenance work at a McDonald’s in the Kansas City, Missouri, area, said company executives keep close tabs on how franchises operate, visiting as often as six times a year. He said on a conference call yesterday that he hoped the decision will make it easier for workers to win higher wages.

McDonald’s also imposes restrictions on franchises that make it difficult for them to operate profitability, said Owens at the National Employment Law Project.

Company Software

“The corporate giant charges high rents and royalty fees and imposes take-it-or-leave-it franchise agreements that require, among other things, that franchisees install company-supplied software to track sales, inventory and labor costs,” she said.

McDonald’s is under increasing pressure to raise wages amid national protests and strikes. On May 21, the day before the company’s annual meeting, fast-food workers protested at its headquarters. McDonald’s told most of its 3,200 headquarters employees to stay home to avoid the demonstration and heavy traffic. Advocates are pushing for a $15 minimum wage for fast-food workers.

Cathy Ruckelshaus, general counsel and program director for the National Employment Law Project, said more than half of fast-food workers have to rely on public assistance in addition to their wages. While fast-food employment is seen as a rite of passage for teenagers, most workers are adults over 20 years of age, she said.

Cases Proceeding

More than 3 million workers prepare and serve food in the U.S., and they make $9.08 an hour on average, according to government data.

Since November 2012, 181 cases involving McDonald’s were filed with the National Labor Relations Board, according to the agency. Sixty-eight of the cases were found to have no merit, while 43 moved forward. Investigations are still pending with an additional 64.

If a settlement isn’t reached, the cases would be argued before an administrative law judge. Those rulings can then be appealed to the NLRB itself and ultimately to federal courts. That means advocates have a long road ahead.

Industry groups, meanwhile, predict a bleak outcome if the decision is upheld.

“This legal opinion would upend years of federal and state legal precedent and threaten the sanctity of hundreds of thousands of contracts between franchisees and franchisors, a bedrock principle of the rule of law,” the group’s chief executive officer, Steve Caldeira, said in a statement. “Franchise job growth and new business formation have outpaced non-franchise growth for the last five years but will undoubtedly come to a screeching halt if this decision is affirmed.”

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Anne Reifenberg

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