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NLRB ruling against McDonald’s: impact on small biz?


(Business News) As the NLRB rules that McDonald’s is jointly liable for their franchisors’ labor and wage violations, we must ask how this ruling impacts the small business world.


McDonald’s at odds with the NLRB

The NLRB (National Labor Relations Board) ruled that McDonald’s is an employer which exerts substantial power over its employees working conditions and should therefore be held jointly liable with franchise operators for labor and wage violations committed by the franchise operators. The NLRB rejected a $5.6 billion assertion that McDonald’s was not in control of employment decisions at its franchises. If the ruling of joint liability is upheld, it could pave the way for unionization options, as well as, higher wages.

This ruling comes after nearly two years worth of complaints were lodged by McDonald’s employees. According to this statement issued by the NLRB, 181 cases have been filed since November of 2012; 43 of these cases are said to have merit.

Michah Wissinger, an attorney at Levy Ratner, who brought the case on behalf of the McDonald’s workers in New York City stated, “McDonald’s can try to hide behind its franchisees, but today’s determination by the NLRB shows there’s no two ways about it: The Golden Arches is an employer, plain and simple. The reality is that McDonald’s requires franchisees to adhere to such regimented rules and regulations that there’s no doubt who’s really in charge.”

And undoubtedly the NLRB agreed, however, McDonald’s plans on fighting the decision.

What does this ruling mean for small businesses?

McDonald’s Senior Vice President of Human Resources, Heather Smedstad, stated: “This decision to allow unfair labor practice complaints to allege that McDonald’s is a joint employer with its franchisees is wrong. McDonald’s will contest this allegation in the appropriate forum. McDonald’s also believes that this decision changes the rules for thousands of small businesses, and goes against decades of established law regarding the franchise model in the United States. McDonald’s, as well as every other company involved in franchising, relies on these existing rules to run successful businesses as part of a system that every day creates significant employment, entrepreneurial and economic opportunities across the country.”

Herein lies the problem: while this ruling would undoubtedly benefit the employees by allowing them to create unions and ask for higher wages, what will it do to the existing small business model in the United States? Will this open the floodgates for other franchises to be led down the same path?

The International Franchise Association, which represents franchisees, has opposed the identification of McDonald’s as a joint employer stating: “If franchisors are joint employers with their franchisees, these thousands of small business owners would lose control of the operations and equity they worked so hard to build.” This is a tricky situation.

What do you think? Is this a win, or the beginning of another slippery slope?

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