NLRB Rules for McDonald’s in Joint-Employer Settlements

By Lisa Nagele-Piazza, J.D., SHRM-SCP, and Allen Smith, J.D. December 16, 2019
NLRB Rules for McDonald’s in Joint-Employer Settlements

McDonald's may settle claims that it engaged in unfair labor practices without admitting liability or joint-employer status, the National Labor Relations Board (NLRB) ruled Dec. 12.

The complaints alleged that in response to McDonald's workers' fight for a minimum wage of $15 per hour, McDonald's Restaurants of Illinois and 29 franchisees located in Chicago, Indianapolis, Los Angeles, New York City, Philadelphia, and Sacramento, Calif., violated the National Labor Relations Act (NLRA) by threatening employees and surveilling their protected activity.

Although the complaints do not allege that McDonald's independently violated the act, they allege that it had enough control over the labor relations policies of the franchisees that it is a joint employer with them. As such, it could be held liable for unfair labor practices committed by the franchisees, according to the complaints.

In 2018, 30 proposed settlement agreements provided 100 percent of the backpay for allegations requiring a monetary remedy, premium or front pay for three employees who were fired, and other remedies. 

An administrative law judge had rejected the settlements. The judge said that the settlements were flawed and their "unusual and complicated form and enforcement mechanisms," among other issues, "virtually guarantee that the settlements will not definitively end the case." The judge further concluded that McDonald's obligations under the settlement agreements "do not in any way approximate the remedial effect" of a joint-employer finding.

The NLRB, however, found that the settlement agreements were reasonable under board precedent. "Contrary to the judge, we find that the settlement agreements effectuate the [NLRA] because they remedy every violation alleged in the consolidated complaints," the board's majority said. "Moreover, we conclude that further litigation would impose a substantial burden on the parties without a significant probability of prevailing on the complaint's joint-employer allegation."

Settlement Approved

Under the settlements, McDonald's franchisees will pay $171,636 to the affected workers. The franchisees must also notify current and former employees about the settlements and set up a $250,000 fund to address future claims. If McDonald's had been deemed a joint employer with its franchisees, the company would have faced more liability and the ruling would have made it easier for workers at franchises to unionize.

(USA Today)

Unions Plan to Appeal

The Service Employees International Union (SEIU) and the Fight For $15 said they will appeal the decision. "McDonald's is walking away with a get-out-of-jail-free card after illegally retaliating against low-paid workers who were fighting to be paid enough to feed their families," the unions said in a statement. McDonald's, however, applauded the ruling. "The settlement ... allows our franchisees and their employees to move forward and resolves all matters without any admission of wrongdoing," the fast-food company said in a statement. "Additionally, current and former franchisee employees involved in the proceedings can now receive long overdue satisfaction of their claims."


Controversy on Joint-Employer Standard

In a 2017 decision, Hy-Brand Industrial Contractors Ltd., the Republican-controlled board overruled an Obama-era joint-employer standard from Browning-Ferris Industries. The prior decision had defined "joint employer" in a way that made it easier for companies to be held liable for NLRA violations committed by contractors or franchisees. In Hy-Brand, the board threw out Browning-Ferris' holding that indirect control by one organization of another is enough to be considered a joint employer. The NLRB instead required that there be direct control by one entity of another for the two to be treated as one. The Hy-Brand decision was vacated, however, in February 2018 after the NLRB inspector general found that a new board member should not have participated in the decision because he was previously too involved in the case as an attorney.

(SHRM Online)

Court Upholds Worker-Friendly Joint-Employer Definition

The U.S. Circuit Court of Appeals for the D.C. Circuit approved the Obama administration's broad definition of joint employer in December 2018. The circuit court's decision raised questions about the extent to which courts will follow the current administration's anticipated rulemaking on who constitutes a joint employer.

(SHRM Online)

New Rule in the Works

The NLRB plans to issue a more business-friendly rule providing that a joint employer must be a company that directly controls another entity's workers. That might include exercising direct and immediate control over the essential terms and conditions of employment of a contractor's or franchisees' employees. Dissenting from the proposed rule, NLRB member Lauren McFerran predicted, "If the majority's final rule could not be reconciled with the D.C. Circuit's Browning-Ferris decision, it presumably would not survive judicial review in that court."

(SHRM Online)



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