McDonald's "joint employer" ruling in the US – a threat to the unique franchisor/franchisee relationship?
The National Labor Relations Board (NLRB) in the United States ruled on Tuesday, 28th July that McDonald’s could be held jointly liable for labour and wage violations by its franchise operators — a
The National Labor Relations Board (NLRB) in the United States ruled on Tuesday, 28th July that McDonald’s could be held jointly liable for labour and wage violations by its franchise operators — a decision that, if upheld, could set a worrying precedent for many franchise brands in the restaurant and other service industries.
The ruling comes after the NLRB investigated 181 complaints that fast-food workers brought in the last 20 months, accusing McDonald’s and its franchisees of illegally firing, threatening or otherwise penalizing workers.
The NLRB found merit in 43 of the 181 claims, and said it would include McDonald’s as a joint employer, a classification that could hold the company responsible for actions taken at thousands of its restaurants - approximately 90 percent of McDonald's restaurants in the United States are franchise operations. The complaints included the assertion that McDonald’s was a joint employer on the grounds that it orders its franchisees to strictly follow its rules on employment practices and that McDonald’s often owns the real estate interest in franchisee owned restaurants. McDonald's intend to contest the ruling.
The ruling runs contrary to a recent case in the US involving the Subway brand (Doctors' Associates, Inc v Uninsured Employers' Fund) which found that the franchisor was not liable for its franchisee's employees' compensation payments (which the franchisee had failed to make). The International Franchise Association (IFA) considers that the misclassification of franchisees as employees is a real threat to the franchise business model and has been lobbying state legislatures to amend state laws to properly account for what the IFA refers to as "the unique relationship at the heart of franchising".
The ruling comes after the NLRB investigated 181 complaints that fast-food workers brought in the last 20 months, accusing McDonald’s and its franchisees of illegally firing, threatening or otherwise penalizing workers.
The NLRB found merit in 43 of the 181 claims, and said it would include McDonald’s as a joint employer, a classification that could hold the company responsible for actions taken at thousands of its restaurants - approximately 90 percent of McDonald's restaurants in the United States are franchise operations. The complaints included the assertion that McDonald’s was a joint employer on the grounds that it orders its franchisees to strictly follow its rules on employment practices and that McDonald’s often owns the real estate interest in franchisee owned restaurants. McDonald's intend to contest the ruling.
The ruling runs contrary to a recent case in the US involving the Subway brand (Doctors' Associates, Inc v Uninsured Employers' Fund) which found that the franchisor was not liable for its franchisee's employees' compensation payments (which the franchisee had failed to make). The International Franchise Association (IFA) considers that the misclassification of franchisees as employees is a real threat to the franchise business model and has been lobbying state legislatures to amend state laws to properly account for what the IFA refers to as "the unique relationship at the heart of franchising".