Mcdonald’s versus NLRB: The End of Franchising, or an Overdue Restoration of Countervailing Power?

• Published date: 01 December 2018
• Author: Ronald J. Adams
• DOI: http://doi.org/10.1111/basr.12156
• Date: 01 December 2018

Business and Society Review 123:4 601–618

© 2018 W. Michael Hoffman Center for Busi ness Ethics at Bentley Uni versity. Published by

Wiley Period icals, Inc., 350 Main St reet, Malden, MA 02148, USA, and 9 600 Garsington

Road, Oxford OX4 2DQ, U K. DOI: 10.1111/basr.12156

Mcdonald’s versus NLRB:

The End of Franchising, or

an Overdue Restoration of

Countervailing Power?

RONALD J. ADAMS

ABSTR ACT

Following a series of nationa l protests in support of an

increase in the federal m inimum wage, ma ny fast food

workers faced retaliation by their employers when they

returned to work; schedules were changed, wa ges and

hours were reduced, and some employees were termi-

nated. These retaliator y actions resulted in a number of

complaints being filed with the National L abor Relations

Board alleging violations of the National L abor Relations

Act. Several of the complaints were found to have merit

and, additionally, in several instances both the immed i-

ate employer, the franchisee, and the corporate organiza-

tion of which it was a part, t he franchisor, were named as

co-defendants. This rul ing—that franchisors like

McDonald’s USA—could be held jointly responsible for the

labor violations of independent franchisees reversed a

long-standing precedent, whereby franch isees were

regarded a s independent contractors solely responsible

for day-to-day labor practices, including compliance with

Ronald J. Adams i s a Professor Emeritus of Ma rketing, Coggin S chool of Business, Universit y

of North Flor ida, 1 UNF Drive, Jacksonv ille, FL 32224. E-mail: r adams@unf.edu.

602 BUSINESS AND SOCIETY REVIEW

federal and state labor statutes. Critics of t he ruli ng argue

that it will open t he door to unionization and may well

spell the end of the ser vice-spon sor franchising for mat.

Supporters of the NLRB a rgue that the rul ing is just and

reflects new “industr ial realities” in retail labor ma rkets.

Further, a case can be m ade that the NLRB’s position

represents a step in the direction of the restorat ion of

more equitable balance of power between labor a nd

mana gement.

In the wake of employee protests over low wages and poor working

conditions (USA Today, November 10, 2015), many fast food work-

ers faced retaliation from t heir employers when they returned

to work. Many employees found that their employer had changed

their schedules, reduced their hours, lowered their wa ges, and/or

demoted or discharged them in reta liation for their participation. In

response to these actions, some 291 unfair labor practice charges

were filed with t he National L abor Relations Board (NLRB) between

November 2012 and December 19, 2014 against McDona ld’s USA

LLC and numerous McDonald’s franchisees. Most of the cha rges

were supported by the Serv ice Employees International Union

(SEIU) as part of a cor porate campaign to organ ize McDonald’s

workers nationwide. Eighty six of the cha rges were found to have

merit and 13 complaints were issued involving 78 cha rges. The 78

charges involve allegations of discr iminatory discipline, reductions

in hours, discharges, and other “coercive conduct” in response to

union organizi ng activities.1 Most importantly, General Counsel

for the NLRB ru led that the franch isor’s “nationwide response”

to the protests justified its inclusion as a joint employer2 whereby

responsibility for labor law violations was shared between both the

franchisee a nd the corporate entity (i.e., McDonald’s LLC) of which

it is a part (Coalition to Save Local Businesses, Februar y 7, 2015).

Critics of the General Cou nsel’s ruling fear th is designation wil l

open the door for unionization and undercut the v iability of the

franchise business model. Fra nchise owners are concerned that

the newly evolved joint employer standard wil l impact both fran-

chisee independence and franchise employee opportunities. Tom

Saia, a Burger Ki ng franchisee, recent ly stated “I’ve worked hard

to become a franchise ow ner (and) I feel like I’d be working for a

large company, and not be my own boss anymore. My Life sav ings