NLRB’s General Counsel Issues Directive That McDonald’s Can Be “Joint Employer” With Franchisees

August 5, 2014

In a directive issued Tuesday, July 29, 2014, National Labor Relations Board (NLRB) General Counsel Richard Griffin allowed 43 unfair labor practices complaints against McDonald’s franchises to go forward. Also, in an unprecedented move, Mr. Griffin departed from long-standing Board precedent and allowed the complaints to proceed against McDonald’s USA, LLC as a “joint employer” of the franchises’ employees. This directive marks yet another effort by the NLRB to expand its reach, facilitate unionization, and increase the risk of violations by employers.

The NLRB has long recognized that franchisors – who often set only general guidelines and standards for their franchisees – are merely intermediaries and are too far removed from day-to-day operations to be “employers” under the National Labor Relations Act (NLRA).

Ignoring NLRB precedent, the general counsel now is pursuing unsupported arguments it recently made concerning franchisors. Specifically:

  • The general counsel recently argued that the current “joint employer” test inhibits effective bargaining and that, in some cases, the “driving force” behind franchising is to avoid unionization.
  • The general counsel further argued that corporate franchisors “can exert significant control over the day-to-day operations of their franchisees” and should be considered “joint employers.”

Tellingly, the general counsel did not argue and did not provide any evidence that franchisors utilize the franchise model to avoid unionization or that they actually exert control over the day-to-day franchisee employment practices. It also should be noted that the union movement and the Service Employees International Union (SEIU) have made attacks on fast food franchises a central focus of their organizing activities over the past year.

If the NLRB disregards its existing precedent and ultimately accepts the general counsel’s new argument, franchisors face substantial liability for local conditions (the majority of which is unknown to the franchisor) which may require franchisors to rethink their entire business model. Additionally, such a change could force franchisors to incur significant legal costs to defend against the alleged conduct of local franchisees. As a result, all franchises should follow these developments closely and may want to contact their industry organizations to consider other actions.

Even if the NLRB rejects the general counsel’s radical position, the fact that the general counsel felt empowered to take such a position provides further evidence of the NLRB’s continued effort to alter long-time rules, precedents and doctrines in ways to benefit unions and harm employers. As we previously reported, the NLRB already has sought briefing on significantly changing the joint employer doctrine to increase the types of situations that can give rise to such a finding. An expansion of the doctrine could negatively affect employers that utilize contract workers to perform parts of their operations and the companies that provide such contract services.

We expect the NLRB to continue issuing decisions that significantly alter well-established precedent. Therefore, employers should continue to monitor developments from the NLRB closely.

Please reach out to your McGuireWoods contact or members of the firm’s traditional labor team with any questions you may have concerning this directive, the NLRA or the NLRB in general.