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On July 29, 2014, the National Labor Relations Board’s General Counsel Richard Griffin announced that he had issued an Advice Memorandum to the NLRB’s Regional Directors authorizing them to issue unfair labor practice complaints against McDonald’s franchisees and their franchisor McDonald’s, USA, LLC as joint employers in 43 cases alleging violations of the National Labor Relations Act. The charges were filed by employees at the franchisees who believe that they were wrongly disciplined for walking off their jobs to attend rallies and demonstrations coordinated by the Service Employees International Union (SEIU) seeking higher “living” wages of $15 an hour. The Advice Memorandum has not been made public in accordance with Board practices and is the first step in the NLRB’s adjudicatory process. It is not binding law at this point in time.

The General Counsel also stated that the NLRB has had 181 cases against McDonald’s since November 2012. The Board found that 68 cases had no merit and that 43 warranted complaints. 64 cases are still being investigated. (6 cases were unaccounted for).

If Mr. Griffin’s decision to treat McDonald’s, USA, LLC as a joint employer with its franchisees is upheld through the NLRB’s administrative hearings and appeals, and subsequent court appeals, it will drastically change the definition of joint employer in matters under the National Labor Relations Act, changing 30 years of legal precedent. In 1984, the NLRB adopted the “significant control” standard. See, Laerco Transportation, 269 NLRB 324 (1984) and TLI, Inc., 271 NLRB 798 (1984). Under this standard, it must be shown that the alleged “joint” employer meaningfully affects matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction. In 2002, the NLRB stated that an alleged joint employer must exert “direct and immediate control” over employment matters and decisions. See, Airborne Freight Co., 398 NLRB 597 (2002).

In May 2014, the NLRB invited briefs in a pending case from those interested on whether the Board should change its standard for joint employers. The SEIU filed a brief arguing in favor of changing the standard to cover franchisors claiming that franchisees had no meaningful control over their businesses. Changing the standard has been a priority with SEIU and other unions. Unionization of the franchise restaurant businesses and other franchise businesses would be easier.

McDonald’s USA, LLC stated to the media that it will vigorously challenge treatment as a joint employer with its franchisees in these cases. It stated that its franchisees have meaningful control over wages, discipline and all terms and conditions of employment.

Some commentators have viewed this new standard as an attack by the NLRB on the franchising business models. However, if the new joint employer standard prevails, it would have far broader implications than just franchisors and franchisees. Companies, their subsidiaries and those to whom they may outsource work such as human resources and staffing companies would be affected as well. The progress of the McDonald’s NLRB cases bears watching.

Dorothy F. Green, Partner, Labor and Employment

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