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McDonald's Has Super-Sized Control Over Franchisees: NLRB - - In Court Case, Company Labels NLRB as "the litigation arm of the SEIU...doing the bidding of unions and activists"

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McDonald's Has Super-Sized Control Over Franchisees: NLRB

 By Aaron Vehling

 McDonald's Has Super-Sized Control Over Franchisees: NLRB - - In Court Case, Company Labels NLRB as "the litigation arm of the SEIU...doing the bidding of unions and activists"

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Law360 - , New York (March 10, 2016, 7:31 PM ET) -- Management consultants, a comprehensive operating manual and an elaborate computer system are ways McDonald's controls the terms and conditions of franchise workers' employment, the National Labor Relations Board argued Thursday in opening statements at a hearing over whether the company is a joint-employer of the franchisees' employees.

The NLRB general counsel, along with union attorneys, McDonald's USA LLC lawyers and a handful of franchisees' attorneys gathered in a Manhattan courtroom -- joined remotely by their counterparts in regions across the U.S. -- to hash out whether McDonald's can be held liable alongside its franchisees for violations of the National Labor Relations Act.

In his opening statement Thursday, NLRB attorney Jamie Rucker argued that McDonald's uses business consultants -- who monitor staffing and business practices and conduct periodic reviews of implementation of those practices -- to exert control over its franchisees. Rucker said the company's thousands-of-pages-long operating manual and point-of-sale and scheduling systems contribute to franchisees having little say over the terms and conditions of workers' employment.

"Given how McDonald's dictates working conditions, it is responsible for what happens to those workers," Rucker said, calling his reading of McDonald's relationship with its franchisees a "straightforward and reasonable application of the joint-employer doctrine."

However, McDonald's attorney Willis Goldsmith of Jones Day, citing a federal court judge, called the NLRB general counsel the "litigation arm of the [Service Employees International Union]" and said the NLRB's prosecutorial office was doing the bidding of unions and community activists who want to assign responsibilities to McDonald's that just don't exist.

"McDonald's does not have the infrastructure that [the general counsel] thinks exists to exert control," Goldsmith said. There are 3,900 owner-operator companies, or franchisees, with more than 13,000 restaurants across the country -- McDonald's isn't set up to administer human resources at that scale, he said.

Goldsmith said that Rucker's opening statement was the first time he had ever heard the NLRB general counsel's case articulated, and rejected the idea that any of the alleged means of control means McDonald's corporate office has a say in employee wages, scheduling and other terms and conditions.

In January, a 2-1 board majority approved Administrative Law Judge Lauren Esposito's plan to first consider the NLRB general counsel's assertion that McDonald's be held jointly liable for the hundreds of alleged labor law violations of dozens of its franchisees, before delving into the specifics of the violations.

The decision rejected the appeals of the fast-food giant and its franchisees to prioritize the individualized cases.

Weaving through NLRB proceedings is a consolidation of 61 unfair labor practices charges against McDonald's and 31 franchisees in six NLRB regions, dating to 2014. The combined actions allege 181 violations of the National Labor Relations Act at 30 different restaurant locations, according to the decision.

Workers and unions instigated the charges saying that the company and its franchisees violated the labor rights of workers who took steps to try to improve their working conditions that included participation in nationwide protests.

Weighing heavily on the proceedings is the NLRB general counsel's assertion that McDonald's is a joint-employer of the people who work for the company's franchisees.

On Thursday, Rucker said that McDonald's dictates everything from how many seconds it should take to serve a burger and the job classifications of workers to setting up a uniform computer scheduling system across the restaurants and even providing anti-union consultants to support franchisees with employees looking to assert their Section 7 right to protected, concerted activity.

The franchise agreement calls for McDonald's to evaluate each franchisee on those and other benchmarks, Rucker said, and therefore McDonald's is co-determining the working conditions of franchisees' employees. That, he said, makes it a joint-employer under the NLRA.

However, Goldsmith wasn't buying it, saying that McDonald's is essentially doing its due diligence as a franchisor -- franchisees are attractive to independent business owners who want to take advantage of the scale and qualities that are available when franchising with a company like McDonald's.

The company doesn't, for example, tell the business owners who to hire or when to schedule them, but it does exert a certain level of control to the extent that any franchisor would in maintaining a uniform customer experience across all franchisees, he said.

"All franchisors, if they're successful, do precisely the same thing," he said.

Goldsmith also cited the NLRB general counsel's advice memo in Freshii last year and said McDonald's relationship with its franchisees is like the relationship in the memo in which the NLRB found no evidence of a joint-employer relationship.

In that case, the general counsel said that although there were evaluations to ensure workers were wearing the right uniforms or if the store was functioning correctly, there was no evidence Freshii exerted actual control over the terms and conditions of its franchisees' employment. So to here, Goldsmith said.

He further assailed an idea introduced by the NLRB general counsel that franchising is an anti-union technique as "unsupportable nonsense." He said the company provides information to franchisees on how to handle unrest and the like, but does not specifically intervene in the labor relations of its franchisees.

The closely watched cases come after the NLRB majority last year changed its joint-employer standard in Browning-Ferris, reducing the level of control a company has to have in its employer-employee relationship with workers of secondary companies. Although that case involved the relationship between a vendor and a contracting company, observers speculated that the effects could have an impact on franchising.

The hearing is expected to continue into next week.

The National Labor Relations Board General Counsel is represented by Jacob Frisch, Zachary Herlands, Alex Ortiz, Nicholas Rowe and Jamie Rucker.

McDonald's USA LLC is represented by Jones Day.

The franchisees are represented by Brody and Associates LLC, Hirsch & Hirsch, Schoenberg Law Office, Fisher & Phillips LLPBest Best & Krieger and Bond Schoeneck & King PLLC.

The charging parties are represented by Levy Ratner PCJames & Hoffman PC, Healey & Hornack PC, Dowd Bloch Bennett & Cervone, Weinberg Roger & Rosenfeld, Macey Swanson & Allman, and Rothner Segall & Greenstone.

The lead cases are Fast Wood Workers Committee and SEIU v McDonald's USA LLC, case numbers 02-CA-093893, 04-CA-125567, 13-CA-106490, 20-CA-132103, 25-CA-114819 and 31-CA-127447, before the National Labor Relations Board.

--Editing by Kelly Duncan.

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