McDonald's can be held liable for wage and labor violations by its franchisees, according to a ruling Tuesday by the National Labor Relations Board. The decision could mean more leverage for fast-food workers, but not before McDonald's and the rest of the restaurant industry fight to have it reversed.
In the war between fast food companies and their workers over higher wages and better working conditions, the companies haven’t lost many battles. They lost a big one this week. But can it lead to the higher pay and organizing power that food-service workers are hoping for?
In a decision that could ripple throughout the US fast food industry, the National Labor Relations Board (NLRB)’s general counsel ruled Tuesday that McDonald’s can be held liable for labor and wage violations by its franchisees. That means McDonald’s can be named a “joint employer” in any future complaints or lawsuits filed against the franchisees who own and run individual or groups of McDonald’s restaurants, according to the ruling.
McDonald’s franchisees have faced several such lawsuits over the past year, alleging illegal practices like forcing employees to work off the clock, refusing to pay for uniforms, and denying overtime pay. Tuesday’s ruling also makes the company liable for union violations, like punishing or firing employees who organize in protest.
“McDonald’s can try to hide behind its franchisees, but there’s no two ways about it: The Golden Arches is an employer, plain and simple,” Micah Wissinger, an attorney at Levy Ratner who brought the case on behalf of McDonald’s workers in New York, said in a press statement. “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.”
In the past, McDonald’s and other franchise-based food companies have maintained that they aren't responsible when franchisees bend or break labor laws because the corporation itself doesn’t actually own most restaurant locations and doesn’t play a part in day to day operations. Ninety percent of McDonald’s locations – and most other major fast food chains in the US, including Subway, Papa Johns, KFC – operate via franchise models.
However, labor advocates argue that the setup leaves McDonald’s with far more control than they claim while providing a convenient way to sidestep responsibility when rules are broken.
The NLRB’s decision “has the potential to upend the fast-food industry's decades-long strategy of out-sourcing legal responsibility to franchisees when it comes to securing workers' rights,” Mark Barenberg, a professor at Columbia Law School in New York, said in a statement. “Companies like McDonald’s insert an intermediary between themselves and workers, even though they're manifestly in control of the franchisees' employment decisions.”
The ruling outraged the restaurant industry and the business community at large, which argue that it poses a threat to job creation and small business owners.
McDonald’s says it will fight the ruling. The Oak-Brook, Ill.-based burger giant “believes that this decision changes the rules for thousands of small businesses, and goes against decades of established law regarding the franchise model in the United States," Heather Smedstad, a McDonald’s spokeswoman, said in a company statement. She added that along with other franchise-based businesses – including dry cleaners and auto dealerships – McDonald’s “relies on these existing rules to run successful businesses as part of a system that every day creates significant employment, entrepreneurial and economic opportunities across the country."
The National Retail Federation issued a statement saying the ruling “gives a whole new meaning to the word outrageous,” and that the NLRB’s "contempt for hard working business men and women is on full display when they completely disregard established laws that govern the franchise model – a practice that has literally created thousands of small businesses in communities across America and employ millions of citizens of all ages.”
So what does this mean for workers? For one, it could give them more bargaining power: McDonald’s workers have brought 181 complaints to the NLRB, alleging firing or other punishment for participating in worker strikes dating back to 2012. The NLRB’s legal counsel has found merit in 43 so far, and if the ruling is upheld, McDonald’s and the franchisees will be held accountable.
This would give workers the ability to organize and potentially unionize without repercussions; it also refutes the idea that franchisees act alone in setting worker wages.
But it’s a long way between more organizing power and a $15-an-hour wage. What’s more, McDonald’s looks to have industry backing in its fight against the ruling, and the New York Times suggests the case could go all the way to the Supreme Court before it’s settled.