In a major victory for Big Labor, the National Labor Relations Board ruled against McDonald's Corp. in a class action suit brought by union activists. The decision is also a potentially major rewrite of federal law regarding business franchising.
The case involved whether the corporation was actually an employer of all of the workers at its estimated 2,700 restaurants, including the estimated 80 percent that are privately-owned franchises.
McDonald's had held that it wasn't, which was the conventional understanding of how franchising works. That frustrated labor activists since it meant they couldn't try to organize the workers all once and would have to go restaurant by restaurant.
In a complaint to the NLRB by workers alleging retaliation for joining union-related activities between 2012 and 2014, they argued that the corporation should be included in the suit as a joint employer. In other words, they argued that all McDonald's franchise workers in reality had two bosses.
In a ruling released Tuesday, the NLRB's general counsel office agreed, according to an announcement from the nonprofit group Fast Food Forward. A related group, the Fast Food Workers Committee, had filed the complaint on behalf of the workers. Both groups are backed by the Service Employees International Union, one of the main groups seeking to unionize the corporation.
"As the federal governments determination shows, McDonald’s clearly uses its vast powers to control franchisees in just about every way possible," said Kendall Fells, organizing director of Fast Food Forward, president of the Fast Food Workers committee and a former SEIU organizer. "It's time the company put those same powers to work to do something about the fact that its workers are living in poverty."
A McDonald's Corporation spokeswoman confirmed the ruling and said the company will continue to legally fight it "in the appropriate forum."
"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,'" said Heather Smedstad, McDonald's senior vice president for human resources.
The case will both make it easier for the corporation to be sued over labor disputes and make it easier for unions attempting to unionize the fast food chain by giving it a single target. SEIU already has an extensive media pressure campaign against McDonald's, calling on it to pay its workers a minimum $15 hourly wage.
The case is potentially much broader though since it may create a precedent that would apply to all franchised businesses. Steve Caldeira, president of the International Franchise Association, said 770,000 businesses employing one out of every eight U.S. workers could be affected.
"This legal opinion would upend years of federal and state legal precedent and threaten the sanctity of hundreds of thousands of contracts between franchisees and franchisors, a bedrock principle of the rule of law," Caldeira wrote.
McDonald's Smedstad echoed that concern: "McDonald’s, as well as every other company involved in franchising, relies on these existing rules."