McDonald's Fights to Avoid Employee Status for Franchise Workers

  • NLRB action might affect hundreds of thousands of workers
  • Labor board's finding said to contradict 40-year-old standard

McDonald’s Corp.’s new all-day breakfast menu may be the biggest change at the company these days, but an even bigger shift might be on the horizon: the status of hundreds of thousands of franchisee workers.

The world’s biggest restaurant chain is waging a battle with the U.S. National Labor Relations Board to preserve a decades-old understanding in the industry that fast-food companies don’t employ the staff of franchisees.

The NLRB determined last year that McDonald’s shares responsibility with franchise owners for managing such employees, a finding that promises to have far-reaching impact on the company and its peers if it survives a January trial.

The case, overseen by a labor board judge, involves workers who were allegedly fired or suspended at 29 locations in five states for their involvement in protests and a bid to unionize. Both sides agree the outcome will affect more than a few dozen stores.

The labor board “hopes to fundamentally rewrite franchising and joint employment law,” McDonald’s said in a Monday court filing. If the finding is upheld, “McDonald’s, for the first time ever, would be deemed a joint employer of hundreds of thousands of people employed by its franchisees.”

$1 Million-Plus

With so much at stake, McDonald’s has already spent more than $1 million supplying internal documents to the labor board, and an unknown amount on lawyers’ fees, even though the company faces a maximum fine of only $50,000 in the dispute.

Lawyers for McDonald’s appeared in Manhattan federal court Friday to challenge the NLRB’s demand for more documents in the case, including e-mails of executives and supervisors who may have discussed unionization efforts with franchisee owners.

U.S. District Judge Colleen McMahon, who isn’t overseeing the trial, listened to the NLRB’s characterization of the case before ruling on the subpoena dispute.

“McDonald’s told the franchisees how to respond to the unionization campaign,” which is “evidence of a joint-employer relationship,” NLRB attorney Rachel Vanessa See said Friday in court.

Mixed Ruling

“Well, that’s a stretch,” McMahon said. The judge said the NLRB was “picking on McDonald’s” by requesting so many documents in the case and gave a mixed ruling that aided both sides.

The NLRB will get information about fewer additional McDonald’s employees than it wanted but more than the company wanted to surrender.

The dispute comes as McDonald’s is enjoying a stock rally as Chief Executive Officer Steve Easterbrook revamps the menu and tries to turn around sales. If the NLRB’s finding survives, the company, based on Oak Brook, Illinois, will need to vastly expand its monitoring of employees to ensure proper labor practices. Ninety percent of McDonald’s U.S. stores are owned by franchisees.

The dispute started after the Service Employees International Union “flooded McDonald’s franchisees with garden-variety unfair labor practice charges,” the company said in court papers. “These charges are unremarkable but for the SEIU’s argument that McDonald’s is a joint employer of its franchisees’ employees.”

The case is National Labor Relations Board v. McDonald’s USA LLC, 1:15-mc-00322, U.S. District Court, Southern District of New York.

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