Employees of numerous major fast-food restaurant chains have mounted campaigns to improve their working conditions, including higher wages and fewer unpaid hours. A major hurdle for these campaigns has been the franchise model used by many chain restaurants, in which one company, the “franchisor,” owns the restaurant’s brand, logo, menu, and other intellectual property, while other companies, “franchisees,” operate the actual restaurants. This has created what has been called the “fissured workplace,” since it often limits any legal claims employees can make to the franchisee that operates the restaurant where they work. The General Counsel of the National Labor Relations Board (NLRB), however, recently announced that it will treat McDonald’s USA, LLC, the franchisor of McDonald’s restaurants, and its franchisees as “joint employers.” This means that employees may file complaints against both the individual franchisee that employs them and the franchisor.
In a franchise system, a franchisor enters into agreements with franchisees to operate one or more business locations. The franchise agreement includes various requirements that the franchisees must follow related to branding, marketing, and business operations. Employment issues are often left to the individual franchisees, at least according to the written agreements. Since workers at individual business locations are employed by a franchisee, they cannot assert claims directly against the franchisor. A major criticism of this system is that the terms of franchise agreements have expanded in scope, to the point that they often have direct effects on employment matters. The franchisors, however, remain shielded from liability to the franchisees’ employees.
The NLRB’s Office of the General Counsel (OGC) decided in July 2014 to allow workers to file complaints against both their employer and the national franchisor. At the time of this announcement, the NLRB had received 181 complaints against McDonald’s franchisees since November 2012. While 64 complaints were still under investigation, it had already found 43 of them to have merit. If the NLRB is unable to settle the meritorious complaints, it may file lawsuits naming the individual franchisees and the franchisor as defendants.
The OGC made a similar argument in an amicus brief filed in another proceeding, Browning-Ferris Industries of California, et al., No. 32-RC-109684, amicus brief (NLRB, Jun. 26, 2014). It argued that the NLRB should not apply its current definition of a “joint employer” “because it undermines the fundamental policy of the [National Labor Relations] Act to encourage stable and meaningful collective bargaining.” Id. at 2. The previous definition of “joint employer” used by the NLRB included companies that had the authority, or the potential authority, to exercise “direct or indirect control over significant terms and conditions of employment of another entity’s employees.” Id. at 4, citing Indus. Personnel Corp. v. NLRB, 657 F.2d 226, 229 (8th Cir. 1981).
The NLRB narrowed the definition of “joint employer” considerably beginning in 1984. The current standard, according to the OGC, is “direct and immediate” control over employees. Browning-Ferris, amicus brief at 8. This is inconsistent with federal labor law, and the OGC is urging the NLRB to toss out the current definition in favor of the one used before 1984. The pre-1984 definition is much like the standard applied by the OGC in the McDonald’s cases.
If you need to speak to an employment law attorney in New Jersey or New York regarding a wage claim or another employment law matter, contact the Resnick Law Group today at 973-781-1204 or (646) 867-7997.
More Blog Posts:
Adjunct Professors Face Challenges in Trying to Unionize, The New Jersey Employment Law Firm Blog, October 9, 2014
Court Rules that Restaurant Franchise Must Pay Employees in Money, Not Pizza, The New Jersey Employment Law Firm Blog, September 18, 2014
Department of Labor Data Identify Employers with Most Wage Law Violations, Demonstrate Difficulties of Enforcement in “Fissured Workplaces”, The New Jersey Employment Law Firm Blog, September 9, 2014
Photo credit: By Bruce Marlin (Own work) [CC-BY-SA-2.5], via Wikimedia Commons.