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NLRB Says McDonald's Can be "Joint Employer" with Franchises

McDonald's National Hiring Day sticker on a franchised restaurant
McDonald's National Hiring Day poster on a franchised store's front door in Kentucky, April 2011. Photo/Blue MauMau

NEW YORK – McDonald’s announced today that it has been notified by the National Labor Relations Board that it can be named a “joint employer” for workers in its franchisee-owned restaurants.

The Associated Press reported this afternoon that the NLRB decision was being closely watched because it could potentially expose McDonald’s to liability for the “working conditions and practices in its franchisees’ stores. The article states, “It also puts pressure on the world's biggest hamburger chain at a time when protests for higher wages in the fast-food industry have captured national attention.”

In light of the many protests by “organized” fast-food workers recently demanding higher pay, McDonald’s and other chains have been adamantly declaring that they cannot be responsible for determining wages and other terms at the franchised locations. Many employees are unionizing in hopes of receiving higher minimum wage pay.

The AP report stated that in the U.S., the vast majority of McDonald's more than 14,000 restaurants are owned and operated by franchisees. “The same is true for many other companies, including Burger King Worldwide Inc. and Yum Brands, which owns KFC, Taco Bell and Pizza Hut. The companies make money by collecting royalty and sales fees from franchisees,” the reporter explains.

Labor organizers feel McDonald's should be held accountable as joint employer because the company has so much control in setting the terms of operations at its franchised restaurants.

One source told Blue MauMau that McDonald’s has much more control over its franchisees than most other franchisors. Not only does it take charge of menus, supplies, uniforms and training materials, the hamburger chain also controls franchisees’ balance sheets, and it requires owners to put money into the business, not just annually but at different times of the year. And in its franchise disclosure document, McDonald’s never discloses like other franchisors that the franchisee has control over its labor relations.

Blue MauMau reported in March that three lawsuits had been filed against McDonald’s and its franchisees by restaurant workers alleging the company engaged in several illegal practices to avoid paying workers what they were owed. The complaints states various labor violations, including denying workers of scheduled breaks and requiring them to clean their uniforms. They also allege McDonald’s uses software programs to monitor the ratio of labor costs as a percentage of sales at its stores. If the ratio climbs above a target, workers are forced to clock in late. 

News reports state that the NLRB notified McDonald’s about its decision today.

Heather Smedstad, senior vice president of human resources said McDonald’s plans to contest the decision because the company does not direct the hiring, termination, wages or hours for workers at franchised locations. "This is such a radical departure that it should be a concern to business men and women across the country," Smedstad told the AP reporter.

The International Franchise Association, a trade association and lobbyist for franchising firms, has recently opposed the identification of franchisor McDonald’s as a joint employer. IFA recently also filed a lawsuit in Seattle that challenged whether fast-food and other franchisees could be treated like large employers, thus subjecting franchised establishments to a new $15 minimum wage at an earlier date than other small businesses, AP reported.

"If franchisors are joint employers with their franchisees, these thousands of small business owners would lose control of the operations and equity they worked so hard to build," the International Franchise Association said in a statement. 


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