NLRB goes after McDonald's as "joint employer" - officially declares a war, Nixon Peabody LLP

In addition to the NLRB actions, states are also considering legislation that would make franchisors liable for franchisees’ employment practices.
December 24, 2014

NLRB goes after McDonald's as "joint employer" - officially declares a war
Andrew B. Prescott, Gregg A. Rubenstein, Craig R. Tractenberg, Jessica Schachter Jewell

The National Labor Relations Board has officially begun its attempt to overturn decades of precedent recognizing the separate and distinct operations of franchisors and franchisees. By filing thirteen complaints across the country alleging unfair labor practices at individually-owned restaurants, the NLRB seeks to hold McDonald’s jointly liable for the alleged infractions as a joint employer and upend franchisees’ independent business ownership.

Last week the National Labor Relations Board (“NLRB”) followed through on its summer promise to pursue unfair labor practice charges at McDonald’s restaurants throughout the United States for alleged discriminatory discipline, reductions in hours, discharges, and other coercive conduct directed at employees in response to union and protected concerted activity. While the allegations in the thirteen complaints are rather routine, the NLRB’s decision to hold the franchisor, McDonald’s USA, LLC, responsible for the alleged charges as a “joint employer” is sending shockwaves through the retail and franchise communities. If McDonald’s is found to be a joint employer, the decision would overturn countless years of precedent recognizing the separate and distinct operations of franchisors and franchisees and could jeopardize the viability of franchising as a business model.

Litigating the issue of joint employer liability and the merits of each complaint will be neither quick nor simple as McDonald’s intends a no holds barred defense. Issuing a press release the same day the NLRB issued the complaints, McDonald’s said it “is disappointed with the Board’s decision to overreach and move forward with these charges, and will contest the joint employer allegation as well as the unfair labor practice (ULP) charges in the proper forums.” The International Franchise Association (“IFA”) also voiced its outrage over the concept of making franchisors joint employers. In its own press release, the IFA said that it “will vigorously challenge what the NLRB has done today in the interest of preserving the balance of power between our branches of government to reverse this in the name of job preservation, economic expansion, the rule of law and sound public policy.”

Although McDonald’s may ultimately litigate the issue of joint employment in all thirteen cases, the NLRB has scheduled consolidated hearings to address violations that it contends need relief as soon as possible. As a result, the retail and franchise industry may see some early results sooner than would otherwise be expected. Needless to say, retail and franchise clients need to stay well informed of these proceedings. While an ultimate decision is almost certainly years away, early decisions that hold McDonald’s liable for conduct that occurs at its thousands of franchised locations will likely impact the entire franchise market space and could jeopardize the significant job growth it has created.

In addition to the NLRB actions, states are also considering legislation that would make franchisors liable for franchisees’ employment practices. Nixon lawyers, in conjunction with the IFA and franchisors, are actively opposing these efforts. For real time advice about how to oppose and prevent joint employment issues, contact any of the Nixon lawyers on the Franchise and Distribution or Labor and Employment teams.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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