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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.