Practical Impact of NLRB McDonald’s Announcement

July 31, 2014

Legal update

The following facts may help clarify Tuesday's NLRB announcement that McDonald's is a "joint employer" of franchisee employees.

What happened?No binding legal ruling has been made. On Tuesday, the NLRB's General Counsel, Richard Griffin, announced that he will seek to prove that McDonald's is a "joint employer" with some of its franchisees. If the General Counsel succeeds, McDonald's will become jointly liable for any violations of the National Labor Relations Act committed by these franchisees. The same legal principle may apply to many other quick-serve restaurant franchises.

The NLRB's General Counsel, however, is the labor law equivalent of a prosecuting attorney. His decisions have no legal impact unless and until the full National Labor Relations Board agrees with him. Even then, the NLRB's decision must survive likely court challenges.

What this means.A ruling that McDonald's is a "joint employer" with some of its franchisees will not authorize union elections across the franchise. Current NLRB decisions require both joint employers to agree before their joint employees may be grouped together to vote on union representation. "Joint employers" may be jointly liable for violations of the National Labor Relations Act, but their "joint employees" may not be grouped together for purposes of union representation without both employers' consent.

Whether a particular franchisor will be treated as a "joint employer" with its franchisees will depend upon that specific franchise relationship. The more influence a franchisor has over the employment practices of the franchisee, the greater the likelihood that the franchisor will be found to be a "joint employer" with the franchisee.

What to expect.Expect unions to charge more quick-serve restaurant franchisees with violations of the National Labor Relations Act. The McDonald's announcement signals unions may now embroil the franchisor, with its franchisees, in the expense and distraction of defending these charges. Unions' primary goal is not to win legal battles. It is to harass the quick-serve restaurant industry into capitulating to union demands. Legal attacks have long been a key component of union "corporate campaigns" designed to force unionization from the top down. This is what is happening here.

What to do.Train local managers on how to avoid violations of the National Labor Relations Act. Few quick-serve restaurant managers are familiar with the Act's restrictions and requirements. This makes them easy targets for unions trying to generate publicity that a particular franchise brand "breaks the law." Arming managers with a practical knowledge of the law is the best protection against falling into this union trap.

For further information, please contact John Lovett, Jason Williams or any member of Frost Brown Todd's Franchise and Distribution Practice Group.