NLRB's radicalism may destroy the franchise model

President Obama's National Labor Relations Board will consider a case this week with important implications for the future of the franchise industry.

Last year, NLRB's lead attorney found that McDonald's corporation should be treated as a "joint employer," meaning that it be responsible for the business and labor practices at each and every one of its franchise operations.  This week, an administrative law judge will determine the viability of that finding.  If he confirms it, McDonald's could face numerous suits and actions from the NLRB.

The Hill:

That status would expose the corporation to liability for worker rights violations and force it to the negotiating table in collective bargaining situations.

The joint employer finding is among the most contentious actions taken by a labor board that has emerged as a political lightening rod under the Obama administration, and a top punching bag for business groups and congressional Republicans.

McDonald’s argues it is not a joint employer, contending that independent franchise owners operate the restaurants.  Any ruling to the contrary would do grave harm to the franchise model, business groups say.

“It’s not going to stop at McDonald’s,” explained Elizabeth Milito, senior legal counsel of the National Federation of Independent Business (NFIB). “This is really an assault on the entire franchise business model."

McDonald’s accuses the labor board of “mirroring the union’s position” and placing a target on the company's back.

“As we have said previously, the National Labor Relations Board’s decision to involve McDonald’s in its actions against our independent franchisees improperly strikes at the heart of the franchise system — a system that creates economic opportunity, jobs and income for thousands of business owners and their employees across the country,” the company said in a statement.

But critics allege McDonald’s is, in fact, controlling the operations from a distance by instructing franchise owners on everything from their employees schedules to what they should say to customers and how they fold sandwich bags — claims the cheeseburger chain adamantly disputes.
“McDonald’s is the boss,” said David Dean, an employment lawyer with James & Hoffman PC. “It shouldn’t be hiding behind its franchisees.”

The consolidated case now before the NLRB stems from dozens of complaints of alleged retaliatory actions taken by McDonald’s franchises against employees who participated in nationwide fast food protests.

The McDonald's franchisee is as much an independent business owner as the the local Ace Hardware store owner is.  He gets his supplies from a McDonald's-owned distributor because the whole purpose of a franchise operation is that a Big Mac taste the same in Streator, IL as it does in Beijing, China.  As for "instructing" franchise owners on employee schedules and the like, the company conducts numerous training seminars to help operators achieve success.  As with any training, examples of the right way to schedule employees are bound to be given.  Does this mean McDonald's is micromanaging its franchises?

If the radical lawyers at the NLRB get their way, that's how the actions of the company will be interpreted.  What this really is about is giving labor unions a back door to organizing every single franchise in the country.  In an industry with such tight margins, unionization would be the death knell of franchises.

President Obama's National Labor Relations Board will consider a case this week with important implications for the future of the franchise industry.

Last year, NLRB's lead attorney found that McDonald's corporation should be treated as a "joint employer," meaning that it be responsible for the business and labor practices at each and every one of its franchise operations.  This week, an administrative law judge will determine the viability of that finding.  If he confirms it, McDonald's could face numerous suits and actions from the NLRB.

The Hill:

That status would expose the corporation to liability for worker rights violations and force it to the negotiating table in collective bargaining situations.

The joint employer finding is among the most contentious actions taken by a labor board that has emerged as a political lightening rod under the Obama administration, and a top punching bag for business groups and congressional Republicans.

McDonald’s argues it is not a joint employer, contending that independent franchise owners operate the restaurants.  Any ruling to the contrary would do grave harm to the franchise model, business groups say.

“It’s not going to stop at McDonald’s,” explained Elizabeth Milito, senior legal counsel of the National Federation of Independent Business (NFIB). “This is really an assault on the entire franchise business model."

McDonald’s accuses the labor board of “mirroring the union’s position” and placing a target on the company's back.

“As we have said previously, the National Labor Relations Board’s decision to involve McDonald’s in its actions against our independent franchisees improperly strikes at the heart of the franchise system — a system that creates economic opportunity, jobs and income for thousands of business owners and their employees across the country,” the company said in a statement.

But critics allege McDonald’s is, in fact, controlling the operations from a distance by instructing franchise owners on everything from their employees schedules to what they should say to customers and how they fold sandwich bags — claims the cheeseburger chain adamantly disputes.
“McDonald’s is the boss,” said David Dean, an employment lawyer with James & Hoffman PC. “It shouldn’t be hiding behind its franchisees.”

The consolidated case now before the NLRB stems from dozens of complaints of alleged retaliatory actions taken by McDonald’s franchises against employees who participated in nationwide fast food protests.

The McDonald's franchisee is as much an independent business owner as the the local Ace Hardware store owner is.  He gets his supplies from a McDonald's-owned distributor because the whole purpose of a franchise operation is that a Big Mac taste the same in Streator, IL as it does in Beijing, China.  As for "instructing" franchise owners on employee schedules and the like, the company conducts numerous training seminars to help operators achieve success.  As with any training, examples of the right way to schedule employees are bound to be given.  Does this mean McDonald's is micromanaging its franchises?

If the radical lawyers at the NLRB get their way, that's how the actions of the company will be interpreted.  What this really is about is giving labor unions a back door to organizing every single franchise in the country.  In an industry with such tight margins, unionization would be the death knell of franchises.