Tags: McDonalds | MCD | labor | franchise

McDonald's Faces Potential Franchise Crisis in Federal Labor Ruling

By    |   Friday, 01 Aug 2014 10:05 AM

Cancellations Mount Under Obamacaretacles on the labor front that could shake up the franchise restaurant industry in the United States.

The National Labor Relations Board ruled the fast-food icon is a “joint employer” together with its franchises, and therefore can be liable in lawsuits filed by its workers. The lawsuits claim employees are forced to work off-the-clock and are not paid overtime.

Most of McDonald’s 14,000 U.S. restaurants are owned by franchisees, not by the company itself.

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Heath Smedstad, senior vice president of human resources at McDonald’s, said the company will fight the ruling.

“McDonald’s will contest this allegation in the appropriate forum,” she said in a statement. "McDonald's also believes that this decision changes the rules for thousands of small businesses, and goes against decades of established law regarding the franchise model in the United States."

Smedstad said McDonald’s does not meet the legal definition of a joint employer.

“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.’”

The International Franchise Association also condemned the labor board's ruling.

"Millions of jobs and the livelihoods of hundreds of thousands of independent franchise small businesses are now at risk due to the radical and unprecedented nature of this decision," association President and CEO Steve Caldeira said in a statement. "Ruling that franchises are joint-employers will be a devastating blow to franchise businesses and the franchise model."

If the board's ruling is upheld, some experts believe its decision could pave the way for the fast-food industry to unionize.

Caldeira said, “By proposing this seismic change, a supposedly independent federal agency is yielding to intense outside pressure from labor unions led by the Service Employees International Union, which is seeking to unionize franchise chains and undermine the proven, time-tested franchise business model.”

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

Micah Wissinger, a lawyer for some McDonald’s employees in New York, told the Times, “McDonald’s can try to hide behind its franchisees, but today’s determination by the N.L.R.B. shows there’s no two ways about it: The Golden Arches is an employer, plain and simple.”

“The reality is that McDonald’s requires franchisees to adhere to such regimented rules and regulations that there’s no doubt who’s really in charge,” Wissinger said.

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Cancellations Mount Under Obamacaretacles on the labor front that could shake up the franchise restaurant industry in the United States.
McDonalds, MCD, labor, franchise
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2014-05-01
Friday, 01 Aug 2014 10:05 AM
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