A Bad Ruling for McDonalds, a Great Ruing for the Rest of Us

The National Labor Relation's board has ruled that the McDonalds corporation bears some of the responsibility for its franchisees working conditions:

The general counsel of the National Labor Relations Board ruled on Tuesday that McDonald’s could be held jointly liable for labor and wage violations by its franchise operators — a decision that, if upheld, would disrupt longtime practices in the fast-food industry and ease the way for unionizing nationwide.

Business groups called the decision outrageous. Some legal experts described it as a far-reaching move that could signal the labor board’s willingness to hold many other companies to the same standard of “joint employer,” making businesses that use subcontractors or temp agencies at least partly liable in cases of overtime, wage or union-organizing violations.

The ruling comes after the labor board’s legal team investigated myriad complaints that fast-food workers brought in the last 20 months, accusing McDonald’s and its franchisees of unfair labor practices.

Richard F. Griffin Jr., the labor board’s general counsel, said he found merit in 43 of the 181 claims, accusing McDonald’s restaurants of illegally firing, threatening or otherwise penalizing workers for their pro-labor activities.

………

The fast-food workers who filed cases asserted that McDonald’s was a joint employer on the grounds that it orders its franchise owners to strictly follow its rules on food, cleanliness and employment practices and that McDonald’s often owns the restaurants that franchisees use.

I am not sure how wide the application of this ruling will be.

McDonald's exerts far more control over the operation of its franchisees than most other companies operating in this manner. Not only, as noted above, does McDonald's have physical ownership of many of the restaurants that its franchisees operate, but:

In the current cases, the fast-food workers, backed by the Service Employees International Union, said that McDonald’s had significant control over its franchisees’ employment practices, noting that it supplies many with software telling them how many employees to use at any given hour. The workers pointed to an instance in which McDonald’s even told a franchise owner that it was paying its employees too much. The average fast-food wage is about $8.90 an hour.

While it is conceivable that a company might want to prevent its franchisees from underpaying its workers to preserve the reputation of the brand, there is no such justification for warnings about overpaying its worker.

This is pretty much a prima facie case that McDonald's is an active co manager of those restaurants.

It appears to me that this level of direction is rare among the various franchise businesses, and I think that, as a result of this decision, it will become ever rarer, so this will likely only have minor impact.