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By:  Dan Cohen – 4/3/15

For some time now, the National Labor Relations Board’s Office of the General Counsel has been on the offensive against McDonald’s USA, LLC and its franchise system. The Office of the General Counsel (“OGC”) in essence claims retaliatory action by the McDonald’s franchisee’s stemming from the nationwide protests by fast food workers about their wages. While the underlying facts provide for an interesting backdrop, the NLRB’s theory against McDonald’s USA is what I find to be the bigger story. The OGC has suggested that McDonald’s USA, through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisee’s operations, beyond protection of the brand, to make it a joint employer with its franchisees, sharing liability for any violations of the NLRA.

Since 2012, the OGC has found more than 100 of the 310 charges against McDonald’s USA and its franchisees to be meritorious. Those that have not been settled have been consolidated into 19 separate complaints across the country, including one in Detroit’s Region 7 office. The OGC consolidated some of the complaints, and hearings began on March 30th in New York. The hearings will eventually move to Chicago and then on to Los Angeles.

The issuance of complaints against McDonald’s came after the OGC filed its amicus brief on June 26, 2014, in Browning-Ferris Industries of California v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters. The Browning-Ferris case arose in the context of a union election campaign. The Teamsters sought to organize recycling sorters directly employed by a subcontractor, Leadpoint Business Services, but also asserted that Browning-Ferris was a joint employer with Leadpoint. The case was initially dismissed under the NLRB’s long-standing joint employment test because Browning-Ferris did not exercise enough control over its contracted recycling sorters. The Teamsters filed an appeal, seeing the case as an opportunity “to address how best to evaluate joint-employer status in this increasingly common setting: workplaces where employers use labor contractors or staffing agencies to supply workers.”

In its amicus brief, the OGC argues that the time has come for the NLRB to alter the standard it has used for over 30 years when determining whether two separate and independent employers will be considered joint employers. The current standard was articulated in TLI, Inc., 271 NLRB 798 (1984), and Laerco Transportation, 269 NLRB 324 (1984). There, the NLRB held that legally separate entities are joint employers only when they actually share the ability to control or co-determine the essential terms and conditions of employment and can meaningfully affect matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction of employees. The Board has also indicated that the control must be “direct and immediate.” According to the OGC, however, the NLRB should broaden its joint-employer standard to include an entity that: (1) exercises “direct or indirect control” over working conditions; (2) has “unexercised potential to control” working conditions; or (3) where the “industrial realities” make the inclusion of the purported joint employer essential to meaningful bargaining.

Shortly, after the OGC filed its amicus brief, the Board decided CNN News Network and Team Video Services LLC, and found CNN and its labor contractor were joint employers of the contractor’s unionized employees even though CNN had not been named as an employer in the union’s election petition and had never engaged in collective bargaining. When CNN replaced Team Video with a non-union contractor, the union alleged that CNN terminated Team Video out of anti-union animus and unlawfully refused to bargain with the union about its decision to terminate the contract. The NLRB found CNN to be a joint employer because of the operational control provisions of its contract with Team Video, which granted CNN the authority to exercise control over hiring and work hours, including staffing levels and overtime. The Board rejected the CNN’s argument that the control had to be direct and immediate and ruled that the potential for control to be dispositive. CNN has since appealed the decision.

There is little doubt that the standard being championed by the OGC will have a dramatic impact on the franchise business model as well as the staffing industry. An expanded definition of joint employment will suddenly make franchisors financially responsible for unfair labor practices committed by their franchisees and motivate workers to organize franchisees in hopes of bringing the franchisor (and its much deeper pockets) to the bargaining table. It will also result in a significant expansion of union membership in the private sector as organizing contingent and temporary workers will become far easier. Quite frankly, the stakes could not be much greater, and it is hard for me to imagine how the NLRB’s attempt to change its decades’ old joint employment test will not reach the Supreme Court. But, that will take time as the cases must first make their way through the federal courts of appeal.