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August 1, 2014

NLRB’s General Counsel Alleges McDonald’s Corp. Is A Joint Employer

On July 29, 2014, General Counsel Richard F. Griffin of the National Labor Relations Board (NLRB) issued an advice memorandum to the NLRB’s regional offices authorizing the issuance of unfair labor practice complaints against McDonald’s Corp. on the theory that it is a joint employer with franchisees operating fast-food restaurants throughout the United States.  The memorandum does not carry the legal force of a decision by the NLRB.  It does however reflect the General Counsel’s expressed desire to broaden the joint employer test in a manner that will make franchisors and business entities with outsourcing arrangements more susceptible to liability and bargaining obligations under the National Labor Relations Act (NLRA). 

The advice memorandum comes on the heels of the NLRB’s request for amicus briefs addressing the appropriate standard for determining joint employer status in the case of Browning-Ferris Industries of California, Inc., NLRB Case No. 32-RC-109684 (2013).  In June 2014, the NLRB’s General Counsel filed an amicus brief arguing that the NLRB should adopt a broader joint-employer standard more reflective of the “economic realities” governing the relationship between an alleged joint employer and the direct employer of workers.  Under the General Counsel’s proposed test, an entity could be a joint employer if it exercised direct or indirect control over working conditions, had the unexercised potential to control working conditions (e.g., pursuant to a contract), or where “industrial realities” otherwise made its presence necessary for meaningful collective bargaining.  The General Counsel’s brief specifically references franchise and outsourcing arrangements as undermining meaningful collective bargaining and suggests that these types of business arrangements would be viewed suspiciously under the new standard.  

The General Counsel’s proposed standard is substantially broader than the NLRB’s current standard, which provides that legally separate entities are joint employers when they share or codetermine the essential terms and conditions of employment (i.e., hiring, firing, discipline, supervision, and direction of employees).  Under this standard, a joint employer relationship may only be found if the alleged joint employer has “direct and immediate” control over such terms and conditions of employment.  Moreover, the NLRB currently focuses on actual control exerted by the alleged joint employer over the direct employer’s workers, rather than potential control such as that which might exist under a contract.     

The General Counsel’s advice memorandum in the McDonald’s Corp. cases reflects the broader joint employer standard he has proposed.  The memorandum authorized the issuance of at least 43 complaints against McDonald’s Corp. based on unfair labor practice charges filed by employees of its franchisees. Those charges emerged from a series of strikes by employees of McDonald’s restaurants protesting wages and work conditions. Assuming these cases are not settled, they will proceed against McDonald’s Corp. as well as its franchisees.  McDonald’s has expressed its intention to vigorously contest any claim that it is a joint employer both at the NLRB and, if necessary, in the federal courts. 

Takeaway for Employers

While the memorandum to the regional offices is not legally binding, and has not yet been adopted by the NLRB, it is reflective of the General Counsel’s more aggressive position on the joint employer issue.  If the test advocated by the General Counsel survives legal challenge, franchisors and businesses using outsourced labor will be at greater risk of being held a joint employer under the NLRA.   

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If you have any questions regarding the advice memorandum, amicus brief or related issues, please do not hesitate to contact us.