On Friday, Dec. 19, the National Labor Relations Board General Counsels office issued complaints against McDonalds and 13 of its franchisees, alleging that they jointly retaliated against workers who participated in the many fast food minimum wage protests that occurred around the country earlier this year.
Many business analysts are projecting that a Board decision finding that McDonalds is a joint employer with its franchisees would rock the fast food industry as well as the many other industries that rely heavily on the franchising model for their economic viability. While the McDonalds complaints are getting a lot of attention, the Board itself is expected to make a decision any day now in Browning-Ferris Industries of California, Inc., in which it is expected to overturn a 30-year-old standard for determining if joint employer status is appropriate in the context of the relationship between a temporary staffing company and its client. These developments could not only result in improving union organization odds, but also an upheaval in how these common business models typically operate.
The NLRB General Counsel is taking the position that McDonalds through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations of the National Labor Relations Act. According to the General Counsel, This finding is further supported by McDonalds, USA, LLCs nationwide response to franchise employee activities while participating in fast food worker protests to improve their wages and working conditions. A copy of one of the complaints, which was filed in Region 13 (Chicago) can be found here. Thus far, no complaints have been issued in either Region 8 (Cleveland) or Region 9 (Cincinnati).
In Browning-Ferris, Browning-Ferris obtained temporary employees from Leadpoint Business Services pursuant to a contract between the two companies. In attempting to organize the Leadpoint employees who were working at BFI, the union also alleged that BFI was a joint employer of the workers. An administrative law judge concluded that Leadpoint was the sole employer of the workers, noting that Leadpoint provided its own human resources function on-site at BFI; recruited, screened and hired all of the employees it assigned to BFI; and provided its own on-site managers and supervisors for the workers it employed at BFI. The union appealed and invited the Board to revisit its 30-year-old standard for determining joint employer status. In reaching his decision, the ALJ relied on the current joint employer standard, which has been in place since 1984, in which the Board concluded that a joint employer relationship exists if two entities share or co-determine the essential terms and conditions of employment of the employees in the petitioned-for bargaining unit.
The union appealed and has urged the Board to adopt a broader standard that considers any indirect control that one entity may exert on the terms and conditions of anothers employees. For instance, in Browning-Ferris, the union argues that BFI exerts indirect control over the Leadpoint employees because (1) BFI owns the facility at which they work; (2) maintains production and operational policies that impact employee hours; (3) requires Leadpoint to perform certain screening methods on employees before they are assigned to BFI; and (4) BFI has the right to direct Leadpoint to terminate any employees assignment at BFI. Presumably, another influence that BFI would have over the employees terms and conditions of employment would be the price or reimbursement rates it was willing to pay for the temporary services that Leadpoint provides. The lower the price, the less Leadpoint can afford to pay its employees.
As noted in one of the amicus briefs, however, the expansion of the joint employer standard would have numerous adverse effects on businesses that utilize temporary workers. First, businesses create operational and production policies and reimbursement rates paid to temporary service providers not for the purpose of impacting worker terms and conditions, but rather to efficiently and safely run its business. A joint employer finding would negatively impact these legitimate business interests. In addition, the proposed indirect standard would discourage businesses from including responsible contractor policies and supplier codes of conduct in their agreements for fear of being labeled a joint employer, could prompt businesses to terminate existing temporary service relationships to avoid joint employer status, and would create potential liability for the unfair labor practices of the supplier company.
We will provide updates along the way as the McDonalds complaints move through the administrative process and when the Browning-Ferris decision is issued. In the meantime, franchisors and businesses either providing or using temporary services will want to consider their options if they were to be considered as joint employers in the context of their current business relationships.
Brian Hall is a partner at Porter Wright Morris & Arthur LLP, where he helps companies effectively manage their full range of workforce issues. Hall is also editor of the firms Employer Law Report.
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