NLRB Sues McDonald's, Signaling a Seismic Shift in the Joint Employer Doctrine

As expected, and discussed during our recent webinar, the National Labor Relations Board (NLRB or Board) issued 13 complaints against McDonald's, USA, LLC and several of its franchisees alleging that McDonald's is a "joint employer" with its individual franchisees. Specifically, the complaints allege that McDonald's and its franchisees violated the rights of fast food workers by making statements and taking actions against them for participating in protests and other activities to improve their wages and working conditions.  

The McDonald's complaints reflect a significant expansion of the NLRB's "joint employer" doctrine. The Board has long held that one company could not be considered a joint employer of another company's employees, unless it exercised "direct and immediate" control over the hiring, firing, discipline, supervision, wages and benefits of those employees. Rejecting the traditional joint employer test, the Board contends that McDonald's should be held liable for its franchisees' action based on the indirect control McDonald's exercises over the franchisees' operations. The Board's General Counsel claims that treating McDonald's as a joint employer promotes meaningful bargaining by precluding the franchisor from exercising economic pressure on the terms and conditions of the franchisees' employees without the franchisor having to bargain over those terms and conditions.

Although the NLRB has not formally expanded the "joint employer" standard, most commentators believe that will occur when the Board issues its decision in Browning-Ferris Industries of California, (No. 32-RC-109684). In March of this year, the Board granted review of an Acting Regional Director's decision that had applied the traditional, 30-year old joint employer test to find that one company was not a joint employer with its on-site contractor. In Browning-Ferris, the Board solicited amicus briefs asking whether the joint employer standard should be modified and, if so, what factors should be considered in determining joint employer status.  The Board's decision in Browning-Ferris is widely expected to be issued before the end of the year.

The Board's decision to issue the complaints in the McDonald's cases and its pending decision in Browning-Ferris are likely to have a significant impact on traditional franchising and contracting arrangements. Several trade groups, including the U.S. Chamber of Commerce and International Franchise Association, voiced their opposition to the filing of the McDonald's complaints. Not surprisingly, a number of unions, including the Service Employees International Union, which orchestrated several demonstrations directed toward McDonald's, lauded the Board's recent actions. The NLRB's expansion of the joint employer standard will almost certainly be challenged in court, meaning that employers analyzing their commercial relationships from a joint employer perspective are likely to face considerable uncertainty for years to come.