Joint Employers Smoked Out of Hiding

By Nicholas J. Gleichman

On July 29, 2014, General Counsel of the National Labor Relations Board, Richard F. Griffin issued a statement instructing regional offices to include McDonald’s USA LLC as a “joint employer” with its franchisees in 43 pending unfair labor practices cases. This development comes two months after a wave of fast food worker strikes across the nation. Although the determination has the potential to assign liability and accountability to parent corporations, in part by forcing them to the bargaining table, the potency of the new legal recommendation is yet to be determined.

The General Counsel’s recommendation was seen as a victory for the labor movement, assessing labor accountability on franchisors; however, fast food workers have not yet seen a direct or measurable improvement to their wages and the quality of their work environment. Indeed, workers have not yet seen a complaint issued naming McDonald’s USA LLC as a joint employer despite the Board hinting that a complaint would be issued before the end of October. Labor unions are wary of the prospects of legal challenges to the doctrine. Employer groups feel that the Board’s new position is a stark departure from a well-established, bright line rule.

In 1982, a federal appeals court affirmed the Board’s then interpretation of a joint employer, establishing a “significant control” standard which considers the totality of the circumstances when deciding the liability of a franchisor. NLRB v. Browning-Ferris Indus., Inc., 691 F.2d 1117, 1122 (3d Cir. 1982). Since then, the Board has narrowed its definition of an employer, insisting that only “direct control” of employee practices is adequate to be found a joint employer. Corporate giants such as McDonalds have relied on this stricter definition of employer to maintain that the parent company does not exert sufficient control over the employment practices of the franchisees to be considered a joint employer. This view, however, does not take into account the reality of the franchise model where parent companies supply franchises with labor efficiency software or determine what level of staffing is appropriate at a given shift.

The joint employer directive faces an obstacle course of legal challenges before workers will reap any benefits. The 43 joint employer cases in which Griffin has found merit thus far will likely be argued in front of administrative law judges. If the judges find McDonald’s Corp. to be liable for unfair labor practices as a joint employer, the company is likely to appeal the decision to the Board. The timing of that appeal could make or break the doctrine, given the impending 2016 election and its effect on the political makeup of the Board. But even if the joint employer determination survives Board review, it will be subject to federal appeals court and could very conceivably wind up in the Supreme Court, a daunting prospect for any progressive measure.

However, assuming arguendo that the new employer doctrine survives the gauntlet it faces, widespread changes to the franchise model could be imminent. McDonald’s and its fast food brethren would be put in a position of accepting liability for the employment practices of their franchises, or agree to a new, hands-off model. The former option would undoubtedly entail an overhaul of employee treatment. Wages and conditions are directly correlated with worker satisfaction, so improving them would be a crucial step in minimizing corporate liabilities. The latter option of a hands-off approach seems less likely, given the general trajectory of globalization. However, in that scenario, franchise owners would have more freedom to set wages and working conditions of employees without pressure from the parent corporation to minimize labor costs.