Fight for $15 (Part 3) – Who Employs McDonald’s Franchise Workers?

The oldest operating McDonald's restaurant, the third one built, opened in 1953 in Downey, CA. Photo by Bryan Hong (Brybry26) and used under a Creative Commons Attribution License, https://commons.wikimedia.org/wiki/User:Brybry26.

McDonald’s franchise business model–one in which the parent company rejects any responsibility to its franchise workers for wages, benefits, and working conditions–is under attack by the National Labor Relations Board, according to the company and the International Franchise Association. And Republican legislators in Congress are sympathetic to their call for help.

They contend an August decision by the NLRB, an independent federal agency charged with safeguarding employees’ rights to organize, strikes “at the heart of the franchise system,” threatening not only franchisors, such as McDonald’s, but also “small business owners and their employees,” the franchisees.

Celebrating the NLRB decision are labor activists, unions, and the Fight for $15 campaign, which is largely underwritten by the Service Employees International Union. They believe corporations maintain control over workers but avoid their workplace responsibilities by outsourcing work to franchisees, contractors, temporary help agencies, and others in the supply chain.

The hiring of workers through these evasive arrangements has increased steadily over the last several decades as companies reduced staffing that is not directly related to their core competencies.

McDonald’s claims workers at franchise restaurants are employed by the franchisees, who own and operate the restaurants. McDonald’s maintains that, because the franchisee is the employer, it has no responsibility for the wages or working conditions of the workers. And it has no duty to bargain collectively with a union representing them. The IFA agrees.

However, an August decision by the NLRB relaxed the standards for assessing whether two or more companies qualify as “joint employers” under the law. Companies that co-determine the terms and conditions of employment, according to the NLRB’s criteria, are deemed to be joint employers.

The decision potentially affects any business that relies on franchising or outsourcing work.

If McDonald’s were found to be a joint employer with a franchisee, it would lose the legal shield protecting it from workplace liability for the actions of the franchisee. Such a finding also would require McDonald’s to join a franchisee at the bargaining table if its workers unionized.

“If the SEIU can come up with a way to unionize a franchising giant like McDonald’s, it would be a watershed for organized labor—and could create a replicable strategy for lifting hundreds of thousands, perhaps millions, of low-wage workers.”

Steven Greenhouse, in The Atlantic

The issue is a big deal for McDonald’s since 90 percent of its 14,000 U.S. restaurants are owned and operated by franchisees, which employ 750,000 workers.

At the same time, McDonald’s 3,100 franchisees are concerned the company might exercise more control over franchise operations or, in extreme cases, terminate franchise agreements.

The issue is also a big deal for the nation’s low-wage workers, who have no legal recourse against a parent company that may control decisions about hiring, discipline and termination, wages and benefits, scheduling and hours, work processes, training and safety, and other terms of employment.

In the Fight for $15 campaign, the NLRB’s joint employer decision represents a major breakthrough for fast-food workers who not only want to increase hourly wages, but also to unionize without retaliation.

“If the SEIU can come up with a way to unionize a franchising giant like McDonald’s, it would be a watershed for organized labor—and could create a replicable strategy for lifting hundreds of thousands, perhaps millions, of low-wage workers,” said Steven Greenhouse, writing in The Atlantic.

Unions are winners in the NLRB’s ruling, said the U.S. Chamber of Commerce. “Franchising, a successful business model since the 1850s, may be sacrificed in an effort to reverse decades of declines in union membership.”

The NLRB’s decision “could be one of the more significant by the NLRB in the last 35 years,” said Marshall B. Babson, a lawyer who helped write a brief opposing the rule for the U.S. Chamber of Commerce.