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NLRB shakes up joint-employer landscape

How the Board sees McDonald's could affect more than just franchise businesses

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in Employment Law,Human Resources

The National Labor Relations Board’s lead attorney has determined that franchisors and franchisees—in this case, of the McDonald’s fast-food chain—can be named joint employers when workers file unfair labor practices charges.

The decision could reverberate far beyond franchise businesses, aiding organized labor’s efforts to unionize low-wage workers and raise their pay.

NLRB General Counsel Richard Griffin on July 29 announced that the board plans to name parent company McDonald’s Corp. a joint employer along with local franchise owners in 43 unfair labor practices complaints involving McDonald’s. That means the company could be found liable for any illegal employment practices committed by franchisees. Franchise agreements typically insulate parent companies from liability for the acts of franchisees.

For labor unions, the NLRB decision was official recognition that an arms’-length relationship between parent companies and local management can harm employees. “As the federal government’s determination shows, McDonald’s clearly uses its vast powers to control franchisees in just about every way possible,” Kendall Fells of the Service Employees International Union (SEIU) told The Wall Street Journal.

SEIU protests at McDonald’s restaurants in several states have called on fast-food workers to join the union and demand pay of at least $15 per hour.

The business community voiced alarm about the NLRB decision. “It is just further evidence that the NLRB has lost all credibility as a government agency established to protect workers and is now just ... an adjunct for organized labor,” said National Retail Federation Vice President David French.

“This legal opinion would upend years of federal and state legal precedent and threaten the sanctity of hundreds of thousands of contracts between franchisees and franchisors,” said Steve Caldeira, president and CEO of the International Franchise Association.

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