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Baloney, Big Macs, the NLRB and Franchise Advocacy

A column last week in the Los Angeles Times, entitled “The NLRB-McDonald's Ruling Could Be the Beginning of a Franchise War” is another example of how top franchise industry ‘experts’ and ‘talking heads’ too frequently lack sufficient knowledge about the facts and theories they are discussing. Most notably, for example, contrary to the ‘fact’ set forth in the column, the NLRB matter was not a ‘ruling’ nor was it ‘issued’ by the NLRB. It was, instead, a policy decision made by a rank political appointee in the NLRB. This was nothing more than a personal choice made by the NLRB’s ‘in house’ counsel to include McDonald's as a named defendant in certain pending internal NLRB labor cases. This choice was not litigated before the ALJ, the NLRB or the courts.

The article also makes use of the theoretically tired, and incorrect, argument that franchisors can’t have it both ways – promulgate and enforce rules and regulations relating to franchise operations and at the same time not exercise direct ‘control’ over their franchisees’ employees. Instead, as the author, a Pulitzer Prize winner well knows, there can never be a ‘two plus two equals four’ principle applied to legal ‘control’ determinations. An examination of the historical and current context of ‘control’ disputes in the franchise legal realm shows that the inherent ambiguity is both intellectually-defensible and legally sound.

The tortured legal evolutionary paths of covenants not-to-compete and vicarious liability in the franchise area evidence this clearly. Indeed, as in many other areas of the law, the term ‘control’ in the franchise area can consistently and reasonably be given different meanings depending upon the context of the situation in which it is being applied. The newspaper article’s suggestion that to the extent that a legal term would be applied differently in different contexts – even where identical parties are involved – the legal term would be ‘transparently bogus’ is at best naïve and worst a misrepresentation.

Further, the suggestion in the article that the NLRB was simply ‘trying to adapt’ to the evolving nature of the restaurant industry’ also seems off-base. As noted above, the struggle regarding the determination of relative ‘control’ between franchisees and franchisors for non-NLRB purposes in the franchise area has been raging for the last 40 some-odd years. Like other concepts, it ebbs and flows. Franchising, including the omnipresent tension between its natural stakeholders -- franchisors, franchisees, employees, and consumers -- has ‘been around’ since the beginning of time. Nothing has suddenly changed structurally in the franchise area conceptually or financially that would justify the conclusion that some type of ‘evolution’ has occurred that requires an about-face on the control issue. Further, the legal question whether ‘franchisors control their franchisees’ has been and will always be a heavily fact-based determination that needs to be made on a case by case basis by finders of fact – not by rank political appointees with agendas borne out of having spent their entire work careers in one politically-biased institutional entity.

In addition, the Professor interviewee’s view regarding the ability of affirmative cost apportionment to ‘fix’ the negative impact of any increased costs that might be caused by the NLRB political appointee’s decision (“apportioning the cost is typically within the control of the franchisor, which can set the price of its product”), seems on its face to fly in the face of very many basic and fundamental economics and antitrust principles.  There is little to no empirical evidence to support the conclusion that “the danger of the NLRB counsel's ruling is that while it might stick the big companies with responsibilities for workers, the big companies will stick the franchisees with the costs.” Indeed, theoretically, the ultimate allocation of costs of a ruling that would require unionization and modified labor practices (even assuming that it were to be upheld many years down the road by a court) is not within the complete economic control of any of the relevant stakeholders – manufacturers, mangers, franchisors, employers, franchisees, consumers, or suppliers. Ultimately, the incidence of the ultimate relative cost of the NLRB ruling on the stakeholders will depend upon prolific factors, including the elasticities of demand and supply for the labor, products and services of each franchise. The idea, suggested in the column, that franchisors may simply address ‘increased costs of the labor ruling by setting prices’ of franchise products and services is also in direct conflict with current antitrust decisions regarding vertical restraints. In this regard, although franchisors are immune from maximum price-fixing claims, they are active candidates for minimum price fixing charges. Last, although there is a dearth of empirical work regarding the pass-through ability of the increased costs of a cheeseburger, there are a few that suggest that it is in fact relatively small, at least as it is manifested in the final price of the food to the customer.

Even though I remain (truthfully) one of only a few national litigators representing exclusively franchisees, and not franchisors, I do not believe that my ‘side’ in the political franchise war is benefitted by those who spew sophomoric or unsupported theories and recommendations claiming them to be ‘facts’ and ‘dispositive.’ Now that it appears that ‘big labor’ could be climbing into bed with franchisees on labor and employment issues, it is likely that the already-questionable rhetoric essayed by many franchisee advocates will be parroted and mutated fallaciously by similarly knowledgeable labor advocates.  And, let’s not forget to add to this intellectually-noxious mixture the omnipresent prolific sophistry manufactured by franchisor lobbyists. My personal favorite is that ‘most franchisees don’t want new protective franchise legislation.’

Finally, the franchise cake would not be complete without mixing in the policymakers (e.g., state legislators, NLRB General Counsel) who seem to never be able to get enough of this hogwash from all sides. As with any other commodity in the free market, however, so long as there remains a strong demand for this factual and theoretical bunk, there will be an eternal robust supply of it.

Jeffrey M. Goldstein

Goldstein Law Firm, PLLC

Washington, DC

202 293 3947

jgoldstein@goldlawgroup.com

www.goldlawgroup.com

http://www.latimes.com/business/hiltzik/la-fi-mh-nlrb-mcdonalds-20140804-column.html

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About Jeffrey M. Goldstein

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Jeffrey M. Goldstein represents clients in commercial complex litigation matters across the country. Mr. Goldstein is recognized as one of the top franchise litigators in the country. Mr. Goldstein has extensive experience in representing clients in state and federal courts in cases involving fraud, RICO, antitrust, encroachment, and wrongful termination. Mr. Goldstein also has an active practice in state and federal appeals cases. Mr. Goldstein practices as a franchise lawyer in complex litigation cases representing only franchisees and dealers. Although Mr. Goldstein appears in courts in a pro hac vice capacity depending on the state, he also has direct access to New York, Pennsylvania, Massachusetts, and the District of Columbia (DC), Washington, where holds Bars for those states. 

In addition to his litigation practice, Mr. Goldstein counsels and advises clients in franchise and distribution matters. Mr. Goldstein has represented clients across the United States in almost every leading franchise system. Mr. Goldstein also is retained to counsel many national independent franchisee associations. Mr. Goldstein has also served as an expert witness in several federal court franchise cases.

Mr. Goldstein graduated magna cum laude from Bucknell University with dual degrees in Philosophy and Economics in 1979. In 1983, he obtained his Juris Doctorate from Boston University School of Law, where he also simultaneously received his Masters Degree in Economics.

You can reach Jeffrey M. Goldstein at (202) 293-3947 or email jgoldstein@goldlawgroup.com. His firm's website is www.goldlawgroup.com. 

The Goldstein Law Firm is one of a handful of law firms in the country that represents only franchisees & Dealers. Not every franchise lawyer is a franchisee lawyer. Almost all law firms specializing in franchise law represent either solely franchisors or both franchisors and franchisees, but not solely franchisees & dealers. The philosophy of The Goldstein Law Firm is that all of our franchise attorneys' effort should be focused on advocating for the rights of franchisees, not on cutting new law for franchisors who are very ably represented by the largest law firms in the world. The Goldstein Law Firm offers its franchisee and dealer clients a consistent and unclouded commitment to the cause of franchisees. On a national basis there are merely a handful of franchise lawyers who truly represent only franchisees & dealers. As a franchisee lawyer, Jeff Goldstein is one of these rare franchise lawyers who does not also represent manufacturers and franchisors. 

GLF specializes in: 

General Franchise and Distribution Antitrust violations
Franchise Price-Fixing claims
Wrongful franchise terminations
Franchise Encroachment claims
Franchise Territorial violations
Franchise Dual Distribution competition
Franchise Menu Pricing disputes
Unfair Franchisor competition
Franchise and Distribution Trademark violations
Franchise and Distribution Post-term covenant not to compete restrictions
Wrongful franchise default cases
Franchise Supplier overcharging claims
Franchisor tying arrangements
Franchisor Fraud and Misrepresentation Claims
Franchise Disclosure Document Defects

(202) 293-3947

www.goldlawgroup.com

jgoldstein@goldlawgroup.com

In those cases in which Jeff is retained to litigate franchise law questions, he appears in courts around the country either in a Pro Hac capacity, or through his direct membership in the Bars of New York, Massachusetts, District of Columbia, Washington, and Pennsylvania.

Area of Interest
Franchise Consultant