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Posts Tagged ‘McDonald’s’

McDonald’s to Settle its NLRB Case

Posted on: March 30th, 2018

By: Allen E. Sattler

On March 19, 2018, McDonald’s USA LLC (“McDonald’s”) and the U.S. National Labor Relations Board (the “Board”) entered into a preliminary settlement to resolve many long-standing claims made against McDonald’s concerning its alleged labor law violations.  The proposed settlement reportedly includes the resolution of all outstanding labor law charges against McDonald’s, with payments to individual employees ranging from $20 to $50,000.  The primary issue that McDonald’s and the Board were litigating is whether McDonald’s should be considered a joint employer with its franchisee restaurant owners.  If McDonald’s is found to be a joint employer with its franchisees, McDonald’s may be liable for violations of federal labor laws committed by those franchisees.

An entity is considered a joint employer where that entity has sufficient control over the essential terms and conditions of employment of another employer’s employee.  The standard applied by the Board to determine whether sufficient control exists has changed over recent years.   In August 2015, the Board expanded the scope of the standard by holding that an entity’s control over the employee need not be “direct or immediate” and that the entity need not actually exercise its control over the employee to be considered a joint employer.  Rather, the mere reservation of a right to control the employee might be sufficient to establish a joint employment relationship.  Browning-Ferris Industries of California, 362 NLRB No. 186 (August 27, 2015).

In December 2017 and acting under a new administration, the Board overruled its decision in Browning-Ferris and issued a strongly worded critique of that standard, stating that the “Browning-Ferris standard is a distortion of common law as interpreted by the Board and the courts, it is contrary to the Act, it is ill-advised as a matter of policy, and its application would prevent the Board from discharging one of its primary responsibilities under the Act, which is to foster stability in labor-management relations.”   Hy-Brand Industrial Contractors, Ltd., et. al., 365 NLRB No. 156 (December 14, 2017).  The Board accordingly returned to the less-expansive standard that existed prior to Browning-Ferris.  Pursuant to Hy-Brand, a finding of joint employer status requires proof that the entity actually exercised control over the employee, rather than merely reserving the right to exercise control, and the control must be “direct and immediate.”  Also, a joint employer status will not result where the control is “limited and routine.”

In February 2018, the Board vacated its decision in Hy-Brand on ethical grounds, i.e., a disqualified member of the Board failed to recuse himself.  Hy-Brand Industrial Contractors, Ltd., et. al., 366 NLRB No. 26 (February 26, 2018).  The standard as articulated in Browning-Ferris once again became the controlling standard.

The McDonald’s litigation is significant because a trial on the joint employer issue might provide clarification of the appropriate standard to be applied by the Board, particularly in the franchise context, and a decision on the issue can have an enormous impact on other, similarly situated companies.  If the preliminary settlement is approved, the joint employment status of McDonald’s remains an open question.  The litigation will therefore not result in a clarification of the joint employer standard or have any precedential effect on future joint employer cases.  Unless and until the Board re-visits this issue, the standard as articulated in Browning-Ferris appears to be the controlling standard.

If you have any questions or would like more information, please contact Allen Sattler at [email protected].

What Do You Call Your Chicken?

Posted on: November 9th, 2017

By: Jason C. Dineros

McDonald’s, the world’s second largest fast food chain (behind Subway, for those wondering), is facing a potential class action for advertising its food items containing chicken breast as being comprised of “100%” breast meat. Primarily targeting the Golden Arches’ advertising of its premium-priced, no-longer-a-cheap-date artisan chicken sandwiches, the proposed New York class action alleges these items also contain rib meat.

With the Food and Drug Administration’s implementation of mandatory food nutrition disclosures for all restaurants with at least 20 locations, and the paleo diet attracting nearly as many bandwagoners as the Los Angeles Dodgers, the trend of fast food dining for the last several years has been healthy and nutritious. Naturally—no pun intended—sourcing organic, farm-to-table, less-processed foods comes with it higher food costs.  But surprisingly, diners have been willing to fork over the premium.

While salads remain “puzzles” in fast food menu classifications (since at the end of the day, everyone has been guilty of intending to order “healthy”—only to somehow word-vomit, “I’ll get a #1 with a Coke,” like the first time they told their childhood crush they liked them), there has been a steady increase in premium-ingredient sandwiches, and with it, the increased challenge of controlling food costs. But the even greater challenge then comes of not only controlling the bottom line, but also maintaining brand integrity and avoiding false advertising lawsuits.

For further information or for further inquiries involving hospitality law, you may contact Jason C. Dineros, the Chair of the Hospitality Law Practice Team of Freeman Mathis & Gary, LLP, at [email protected].

Is a Franchisee an Ostensible Agent of a Franchisor? — California Court Denies Summary Judgment on This Theory

Posted on: October 6th, 2015

By: Allison Shrallow

On September 25, 2015, the United States District Court for the Northern District of California granted in part and denied in part McDonald’s USA and McDonald’s Corporation’s Motion for Summary Judgment in the case Stephanie Ochoa, et al. v. McDonald’s Corp., et al. In its Motion, McDonald’s argued it is not Plaintiffs’ joint employer and thus should not be held liable for the various Labor Code violations Plaintiffs allegedly suffered at the hands of its Franchisee, Edward J. Smith and Valerie S. Smith Family Limited Partnership.

The court granted Summary Judgment in favor of McDonald’s on the issue of whether McDonald’s qualified as a joint employer under any one of the three definitions of “employer” set forth by the California Supreme Court in Martinez v. Combs. In opposition to McDonald’s Motion, Plaintiffs submitted evidence that McDonald’s controlled franchisees through its power to terminate franchise agreements, provided recommendations on crew scheduling and staffing, monitored customer service metrics, owned or leased all locations, furnished franchisees with software, and sent business consultants to counsel Franchisees and their employees.   The court, however, found such evidence did not establish a genuine dispute of material fact as to whether McDonald’s, as a franchisor, had the authority to make hiring, firing, wage and staffing decisions at Smith’s restaurants. The court found such decisions to lie exclusively with Smith and its managers.

However, in an interesting twist, the court denied McDonald’s Motion for Summary Judgment on the issue of whether it was a joint employer under an ostensible agency theory of liability. Plaintiffs advanced a theory that Smith is McDonald’s ostensible agent by submitting declarations that they believed McDonald’s was their employer because they wore McDonald’s uniforms, served McDonald’s food in McDonald’s packaging, received paystubs and orientation materials marked with McDonald’s name and logo and applied for jobs through McDonald’s website. The court found “because there is evidence from which a jury could reasonably conclude that McDonald’s and Smith shared an ostensible agency relationship, summary judgment is denied. McDonald’s potential liability as a joint employer under ostensible agency will be resolved at trial.”

Freeman, Mathis & Gary, LLP’s Dennis D. Strazulo, John L. Fitzgerald and Kacie L. Manisco represent Edward J. Smith and Valerie S. Smith Family Limited Partnership in this matter.

NLRB Doubles Down on ‘Joint Employer’ Standard Expansion

Posted on: October 2nd, 2015

By: Tim Holdsworth

On August 27, 2015, the National Labor Relations Board discarded thirty years of precedent and handed down a new and expanded definition of joint employer. See Browning-Ferris Industries of California, 362 NLRB No. 186 (August 27, 2015). This decision comes on the back of the National Labor Relations Office of the General Counsel’s determination last year that McDonald’s USA, LLC, could be named as a joint employer in forty-three unfair labor practice complaints against its franchises, as previously discussed here.

In the August decision, the Board found that an entity is a joint employer if (1) there is a common-law employment relationship between the employee and employer, and (2) the entity possesses sufficient control over an employee’s essential terms and conditions of employment. In determining the entity’s control the Board announced two major departures from precedent in their inquiry, although the majority characterized these changes as merely “reaffirm[ing]” the standard articulated by the Third Circuit in N.L.R.B. v. Browning-Ferris Indus. of Pennsylvania, Inc., 691 F.2d 1117, 1119 (3d Cir. 1982). First, they will no longer require a joint employer to possess and exercise authority to control employees’ terms and conditions of employment, but instead will find sufficient control if the entity merely reserves this authority. Second, they will no longer require the entity’s control to be exercised directly and immediately. Instead, the Board declared that control exercised indirectly, such as through an intermediary, can establish the requisite control.

Applying this new standard, the Board found that Browning-Ferris Industries, the owner of a recycling facility, was a joint employer with Leadpoint, its subcontractor, for workers supplied by Leadpoint that would manually sort materials, clean screens and clear jams on the sorting equipment, and clean the facility.

Although this decision only sets an NLRB standard and has not yet been endorsed by a federal court, given the uncertain scope of what constitutes “indirect control” sufficient to determine an entity is a joint employer, it clearly reaffirms the agency’s effort to dramatically expand employer liability despite decades of contrary decisions. We might also see the NLRB’s standard gain traction in federal courts, where plaintiffs are already pushing for an expansion of employer liability to franchisors under different theories.

In sum, the Agency’s decision to expand the joint employer standard may have a profound effect not just on franchisors, but on labor relations and business relationships in general.

NLRB Claims Franchisor and Franchisees are ‘Joint Employers’ – Is McDonald’s Just The First?

Posted on: August 19th, 2014


By: Bradley T. Adler and Frank H. Hupfl, III

In a surprising departure from established Board precedent, the National Labor Relations Office of the General Counsel announced on July 29, 2014 that it had authorized the NLRB’s Regional Directors to issue 43 unfair labor practice complaints against McDonald franchisees and determined that their franchisor, McDonald’s USA, LLC, could be named as a joint employer.  The announcement comes as a shock to the franchise community and marks a startling conflict with roughly thirty years of established franchise law.

Under the traditional franchisor/franchisee relationship, a franchisee is an independent entity from the franchisor and is not viewed as a joint employer with the franchisee.  The NLRB’s recent announcement seeks to shake up that precedent.

With roughly 90% of McDonald’s more than 14,000 restaurants owned and operated by franchisees, the NLRB’s recent announcement could have significant ramifications for the fast-food company.  In a recent statement, the NLRB said it had received 181 complaints of unfair labor practices since November 2012 alleging that McDonald’s franchisees or their parent franchisor had violated employees’ rights to engage in protected activity under the National Labor Relations Act.  Of the 181 complaints, the general counsel’s office determined that 43 of the cases had merit.  The remaining complaints are either pending or were found to be meritless.

Since the NLRB’s announcement, McDonald’s and other franchise associations have issued statements opposing the general counsel’s determination and warning of the potential devastating effects the NRLB’s holding could have on the franchise world.  We will continue to keep you updated on this novel development.