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

Published date01 December 2018
AuthorRonald J. Adams
Date01 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?
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
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

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