Last week, the National Labor Relations Board’s general counsel announced its position that McDonald’s Corporation can be considered a joint employer with its franchisees for purposes of unfair labor practice claims. This position reverses decades of established law with respect to franchisor/franchisee liabilities for labor and employment claims, and if upheld could cause significant disruption among franchised businesses.
McDonald’s has been the subject of numerous recent NLRB complaints, including claims that employees who sought to unionize restaurants were discriminated against, harassed or terminated. The NLRB only has legal jurisdiction over employers, and traditionally, the franchisor has not been defined as an employer for purposes of labor law coverage. Franchisors typically do not exercise control over the terms and conditions of their franchisee’s employees and therefore are not considered statutory employers.
The NLRB general counsel is now taking the position that McDonald’s and the franchisee are joint employers that are both equally liable for unfair labor practice claims. The general counsel justifies this position by claiming that in McDonald’s case, the franchise agreement allows it to exercise sufficient control over employment matters for the parent company to be considered a joint employer. This includes visits by McDonald’s to franchised locations, and assessments of the franchisee that include its training, scheduling, wage rates, retention and other employment criteria.
McDonald’s immediately announced its intent to oppose this characterization. The general counsel’s legal position is not necessarily that of the full NLRB. It will be subject to review by the Board and eventually by federal courts. However, this announcement means that franchisors are immediately subject to prosecution of unfair labor practice claims by the NLRB general counsel. If upheld, this means that franchisors could be jointly and severally liable for labor violations by their franchisees.