Fast Food Franchisor may be on the Fast Track to a Decision Concerning Joint Employer Status

November 2, 2016 | By

The National Labor Relations Board (“NLRB’) recently issued several precedent-breaking decisions that have the potential to expose franchisors to joint employer liability across the county.

On October 12, 2016, a new development arose in the appeal of one such NLRB matter between franchisor McDonald’s USA, LLC (“McDonald’s”), its franchisees, and a number of employees, over this joint employer dispute. After 65 days of hearings before the NLRB, the parties agreed to sever the complaints involving franchisees in New York and Philadelphia from the complaints that arose in Chicago, Indianapolis, Sacramento and Los Angeles. (McDonald’s USA, LLC, NLRB ALJ, No. 02-CA-093893, order 10/12/16). Those cases will be held in abeyance until a final determination is reached on the New York and Philadelphia matters.  Administrative Law Judge Lauren Esposito approved the agreement to sever in the interest of efficiency.

This effort to speed up a decision, comes more than two years after the July 29, 2014, NLRB ruling, which determined that McDonald’s would be named as a “joint employer” in approximately 43 cases alleging these unfair labor practices. That decision appears to adopt an earlier standard, which found that a company could be considered a joint employer when two or more employers exerted “significant control” over the same employees.   If that decision is upheld on appeal, it has the potential to impact all businesses operating under a franchise model and to open the door to unionizing the fast food industry nationwide.  McDonald’s has stated that it cannot be considered a joint employer because it does not determine or help determine decisions on hiring, wages or other employment matters at the franchisee level.

In an August 2015 matter involving Browning-Ferris Industries of California, Inc. (“BFI”), discussed by HRLegalist, the NLRB found that BFI and Leadpoint Business Services are joint employers with respect to sorters, screen cleaners, and housekeeper employees. In reaching that conclusion, the NLRB used a revised test to determine a franchisor’s joint employer status, which considers whether the employer possesses sufficient direct or indirect control over the work of the employee, such that the control affects the employees’ terms and conditions of employment.  The new standard may expose more franchisors to liability than the previous, more limited test.

Given the broad implications and potential economic impact of these rulings, a case like McDonald’s USA, LLC, NLRB ALJ, No. 02-CA-093893, could end up before the Supreme Court. As always, HRLegalist urges our readers to consult legal counsel if you have any questions about how such NLRB decisions may impact your business.


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