McDonald's Held Liable for Labor Violations by Franchises

By Greenhouse, Steven | International New York Times, July 31, 2014 | Go to article overview

McDonald's Held Liable for Labor Violations by Franchises


Greenhouse, Steven, International New York Times


The ruling comes after the board investigated complaints from workers accusing the restaurant chain of unfair practices.

The general counsel of the National Labor Relations Board has ruled that McDonald's could be held jointly liable for labor and wage violations by its franchise operators -- a decision that, if upheld, would disrupt longtime practices in the fast-food industry and ease the way for unionizing in the United States.

Business groups called the decision, made Tuesday, outrageous. Some legal experts described it as a far-reaching move that could signal the labor board's willingness to hold many other companies to the same standard of "joint employer," making businesses that use subcontractors or temp agencies at least partly liable in cases of overtime, wage or union-organizing violations.

The ruling comes after the labor board's legal team investigated myriad complaints that fast-food workers brought in the last 20 months, accusing McDonald's and its franchisees of unfair labor practices.

Richard F. Griffin Jr., the labor board's general counsel, said he found merit in 43 of the 181 claims, accusing McDonald's restaurants of illegally firing, threatening or otherwise penalizing workers for their pro-labor activities.

In those cases, Mr. Griffin said he would include McDonald's as a joint employer, a classification that could hold the company responsible for actions taken at thousands of its restaurants. Roughly 90 percent of the chain's restaurants in the United States are franchise operations.

The workers who filed cases asserted that McDonald's was a joint employer on the grounds that it orders its franchise owners to strictly follow its rules on food, cleanliness and employment practices and that McDonald's often owns the restaurants that franchisees use.

McDonald's said it would contest the decision, warning that the ruling would affect not only the fast-food industry but businesses like dry cleaners and car dealerships.

Heather Smedstad, a senior vice president for McDonald's, said the N.L.R.B.'s decision was wrong because the company does not determine or help determine decisions on hiring, wages or other employment matters. "McDonald's also believes that this decision changes the rules for thousands of small businesses, and goes against decades of established law," she said.

Throughout the debate to increase the minimum wage to $10.10 an hour, as well as the campaign to pressure McDonald's and other restaurant chains to adopt a $15 wage floor, the companies have said that they do not set employee wages, that the franchise owners do. The N.L.R.B.'s decision would weaken that defense considerably.

Wilma Liebman, a former chairwoman of the National Labor Relations Board under President Obama and now an occasional consultant to unions, said the decision could give fast-food workers and labor unions leverage to get the company to negotiate about steps that would make it easier to organize McDonald's restaurants. Similarly, she said, the ruling could give the workers and unions more clout in pressing McDonald's to have its franchisees raise wages.

And in an era when companies increasingly use subcontractors and temp agencies to free themselves of employment decisions and headaches, experts said the ruling could force the companies to be more accountable. …

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