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[8 comments]

McD's disputes NLRB's 'joint employer' tag

July 31, 2014

McDonald's has always been known for zealously promoting and protecting its brand and working closely with franchisees to make their operations among the most successful anywhere. It is that very relationship that led the general counsel of the National Labor Relation Board (NLRB) to conclude McDonald's is a "joint employer" with franchisees when it comes to the treatment of workers under federal labor laws.

The fast food chain disputes the NLRB general counsel's conclusion. "McDonald's does not direct or co-determine the hiring, termination, wages, hours, or any other essential terms and conditions of employment of our franchisees' employees — which are the well-established criteria governing the definition of a joint employer," said Heather Smedstad, senior vice president human resources, McDonald's USA, in a statement.

Micah Wissinger, an attorney who represents hourly workers for McDonald's in New York, said McDonald's corporate is involved in all aspects of their franchisees' businesses including conducting regular onsite inspections. "There's really no doubt who's in charge," he told The Associated Press.

Since November 2012, workers that have taken part in the "Fight for 15" campaign, which seeks a minimum wage of $15-an-hour for fast food employees, have filed 181 complaints with the NLRB, alleging illegal treatment including firings for protected labor activities. The agency has found 43 cases that have merit, 68 that do not and 64 are pending investigation.

Ms. Smedstad said that making the determination that it is a joint employer would "change the rules for thousands of small businesses" and upset "decades of established law regarding the franchise model in the United States."

As would be expected, franchisor and restaurant industry groups have come out in support of McDonald's while labor organizations endorse the NLRB counsel's conclusion

FINANCIALS:     [NYSE:MCD] [ ]

Discussion Questions:

What effects, if upheld, will the NLRB general counsel's ruling have on McDonald's in the U.S.? What will it mean for other franchised businesses?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

Do you agree or disagree with the view that McDonald's relationship with its franchisees makes it a de facto joint employer?

Comments:

This sounds like an accounting nightmare. Imagine a McDonalds worker that works 25 hours a week for two different franchisees. Somehow now they would be entitled to overtime and health care because they are working 50 hours for "McDonalds." Who pays? I don't know, but most likely that worker would have to terminate one of his two jobs. Workers know that filing frivolous complaints against a small franchisee or less-popular chain will not yield much. But follow the big money to McDonalds corporate and they hope to cash in and get some press. Everyone gets hurt but the lawyers. You won't see this happening to A&W Root Beer or KFC. Just McDonalds, because they are the most well known. Making a determination that McDonalds is a joint employer is one step away from saying the entire industry is a joint employer.

David Livingston, Principal, DJL Research

This is just wrong. A franchise is not the employer. The Best Western, Weston or Hilton brands are not the employer of the workers unless they are company-owned. The push by unions to again be relevant is poised, I believe for a backlash—big time.

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Bob Phibbs, President/CEO, The Retail Doctor

Does any of this surprise anyone reading this? This administration is single handily bringing down our country, and we as the people are afraid to speak up. This craziness must end, or all you will have is BIG BIG business left, as the small creative business owners and franchisees will throw the towel in and close. I am fighting to prevent another huge crackdown on meat grinding laws that are pending in DC, that will completely destroy guys like me, and believe me when I tell you, it is a way to control all the power, and common sense means nothing anymore.

Am I bitter, yes, but for reasons that are bigger than me. How can a free society thrive, when we can not control how we run our businesses anymore? Over regulation is getting worse, and these fools in DC couldn't run a lemonade stand. Let us run our businesses with common sense, a clean place to shop, with the community-minded spirit we once had, and you'll see things change for the better. If we could also level the playing field in our industrial production as well, then millions of good jobs will be coming back, and that is another whole subject altogether, but it does tie into what is happening to all of us in business today. Sorry for my rant, but I see more damage being done to the folks everyday, and wish things were being done for the benefit of the people, rather than the power in DC.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Having worked with hundreds of franchisers and franchisees, I do not see how the NLRB can sight them as be co-employers. Yes, franchisers have standards that they hold their franchisees responsible for meeting. They may even offer tools to help them hire better, but when it comes to the hiring and management of those employees all the responsibility lies with the individual franchisee.

If this ruling is upheld it will be a major blow to the franchise world as we know it. Franchisees will loose a lot more control over the way they do business and franchisers are going to pick up some major liability over something they actually have very little control over.

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Mel Kleiman, President, Humetrics

McDonalds became the focal point for this joint employer push because they are well known, and the fact that the fast food industry has been at the center of the fight for $15 efforts. Should the ruling stand, the impact will be felt not only by McDonalds but every franchisor.

The reference to the fact McDonalds requires its franchisees to adhere to certain standards and therefore is really in charge would apply to every franchise organization whether it is a QSR, hotel chain, c-store, etc. The impact would be devastating. Not only the potential accounting issues David pointed out, but in every aspect of the business. The complications that it creates could mean people with an entrepreneurial spirit but who want a proven business system would no longer have the opportunity to purchase a franchise.

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Steve Montgomery, President, b2b Solutions, LLC

Seems to my layperson and non-legal mind that by definition, a franchisee is an independent business that has certain requirements to meet with the franchisor, but is still an independent business. Makes me think that by the broad interpretation proposed, a broker, wholesaler or distributor is also a co-employer with the manufacturer, or members of an IGA are in fact one business. That sounds like craziness to me.

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David Zahn, Owner, ZAHN Consulting, LLC

This whole idea is absurd. Not only do individuals own franchises, so do businesses. So would that mean that the employees of grocery stores who run the Starbucks franchises would be joint employees of Starbucks?

A line needs to be drawn here. Franchises are independently owned businesses whose hiring and firing is up to the owner. The logic of these complaints is convoluted. Labor is shooting itself in the foot while putting a chokehold on free enterprise.

'RetailRetell'

Not a positive effect for anyone involved with McDonald's or any other franchise business.

QSR franchisees used to function on high school teens holding their first jobs and working 2 to 3 years before moving to greener pastures. A crew could be motivated if treated with respect and if it allowed flexible hours. Today, a lot of QSR crews consist of heads of family whose wages don't cover basic needs. It's just a reflection of the economic troubles and will not change until better jobs are available. Like many of my generation, I worked at McDonald's during my high school years, and I can't recall any heads of household working alongside me unless they held management positions.

The solution of QSR and living wages does not exist in the current equation. I don't think it's a labor issue either, most franchise business like McD's function within guidelines for labor—aren't pre-set guidelines the appeal of a franchise business? The ultimate outcome might be a change in franchise guidelines as they currently stand...and a lack of consistent product and brand for the consumer.

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Carlos Arámbula, Managing Partner, MarcasUSA LLC

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