New Rulings Affect Labor Landscape

Mcdonalds rulingLabor unions saw a setback today with the just-announced ruling from the Wisconsin Supreme Court upholding that state’s law that effectively bans collective bargaining by state government employees. Unions nationwide have poured resources into contesting the law, which ignited a firestorm in Wisconsin when it was signed by Gov. Scott Walker three years ago.

But on a national scale, unions should be much happier about the recent ruling from the National Labor Relations Board’s general counsel, Richard F. Griffin Jr., that McDonald’s Corp. could be held jointly liable for labor and wage violations by its franchisees. Workers at various McDonald’s locations have alleged they were retaliated against after participating in strikes and demonstrations demanding higher wages. Griffin’s ruling, which will probably go before the five-member NLRB board and could possibly go as far as the U.S. Supreme Court, says McDonald’s is a joint employer along with its franchisees and therefore shares responsibility for the retaliatory measures allegedly taken against the employees. The NLRB found that of 181 cases filed against McDonald’s since late 2012, 43 cases have been found to have merit and that the Oak Brook, Ill.-based fast-food giant and its franchisees will be named as respondents if the parties cannot reach settlement, while 68 of the cases have been dismissed and 64 remain under investigation.

The ruling has the business community hopping mad — and that’s no surprise, considering that it has the potential to significantly alter the longstanding franchisor-franchisee business model and could make it easier for unions to organize hourly workers at national retail and restaurant establishments.

The following statement from Angelo Amador, vice president of labor and workplace policy at the National Restaurant Association, reflects what many others in the business community are saying about the ruling:

The ruling … asserting that McDonald’s Corp. is a ‘joint employer’ of its franchisees’ employees overturns 30 years of established law regarding the franchise model in the United States, erodes the proven franchisor/franchisee relationship and jeopardizes the success of 90 percent of America’s restaurants who are independent operators or franchisees.”

Heather Smedstad, senior VP of human resources for McDonald’s USA, said in a statement that “this decision to allow unfair labor practice complaints to allege that McDonald’s is a joint employer with its franchisees is wrong. McDonald’s will contest this allegation in the appropriate forum.”

But proponents of the ruling say McDonald’s actually exercises significant control over its franchisees’ employees, requiring them to abide by an extensive list of rules and regulations and even providing the franchisees with software that helps them determine staffing levels for specific times of the day. Here’s what Micah Wissinger, an attorney who represents McDonald’s workers in New York, told the Society for Human Resource Management:

McDonald’s can try to hide behind its franchisees, but today’s determination by the NLRB 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.”

Former NLRB chairwoman Wilma Liebman told the New York Times that the decision “could give fast-food workers and labor unions leverage to get McDonald’s to negotiate about steps that would make it easier to organize McDonald’s restaurants.”

It’s clear we now have yet another NLRB action that’s once again galvanized the business community in opposition. Considering the sheer number of employees who work for franchisees, along with the record number of temps and contractors in the U.S. workforce today, the ultimate fate of this ruling will be very closely watched .

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