The National Labor Relations Board (NLRB) has told McDonald’s it will allow workers filing labor complaints to treat the fast-food giant as a “joint employer” with its franchisees, the company said Tuesday.
The decision, which McDonald’s said was delivered by phone, could have wide-reaching implications because franchisees own about 89 percent of the more than 14,000 U.S. restaurants.
The ruling could also have implications for a lawsuit over the city of Seattle’s new $15 minimum-wage ordinance.
In June, the International Franchise Association sued the city in federal district court for defining franchises as big businesses subject to a faster phase-in of the higher pay.
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The association argued that individual franchises are independent small businesses and should be treated as small businesses, which have up to seven years to pay the higher wage while large businesses have three to four years. No court date has yet been set for the case.
“If franchisers are joint employers with their franchisees, these thousands of small-business owners would lose control of the operations and equity they worked so hard to build,” the association said in a statement Tuesday.
McDonald’s quickly came out against the decision.
“This relationship does not establish a joint employer relationship under the law,” Heather Smedstad, senior vice president of human resources at McDonald’s USA, said in a statement regarding the corporation’s relationship with its franchisees.
“This decision to allow unfair labor practice complaints to allege that McDonald’s is a joint employer with its franchisees is wrong. McDonald’s will contest this allegation in the appropriate forum.”
A copy of the NLRB decision was not immediately available. However, groups quickly weighed in.
“The staff decision issued today by the National Labor Relations Board recommending that McDonald’s and its franchisees should be considered joint employers gives a whole new meaning to the word ‘outrageous,’ ” David French, the National Retail Federation’s senior vice president for government relations, said in a statement.
McDonald’s and other fast-food operators — pressured by union groups in recent months to raise wages and improve working conditions — have said franchisees are independent business owners who set their own policies. But activists said the decision was proof McDonald’s controls its franchisees more than it claims to.
“The reality is that McDonald’s requires franchisees to adhere to such regimented rules and regulations that there’s no doubt who’s really in charge,” said Micah Wissinger, an attorney at Levy Ratner who brought the case on behalf of McDonald’s workers in New York City.
In a call arranged by labor organizers, longtime McDonald’s worker Richard Eiker said McDonald’s regularly sends officials to check on how franchisees are running restaurants, including by standing outside the drive-thru to time how quickly cars go through.
“Managers go crazy when corporate comes in for these inspections,” he said, adding that restaurants are constantly told to keep costs down.
The NLRB said it has had 181 cases involving McDonald’s filed since 2012. For the 43 cases that were found to have merit, the board said McDonald’s or its franchisees can be named as respondents. The other cases were found to have no merit or are still pending.