NLRB and Unions Target Outside-the-Box Business Strategies

Written by Scott M. Wich

Increasing challenges and competition over recent years have led business owners to explore new opportunities in order to sustain themselves and grow. For many employers, such efforts have taken the form of affiliations, subcontracting, franchising and the like. For the NLRB and unions, which continue to suffer historic lows in the representation of private-sector employees, the pursuit of alternate business structures has not gone unnoticed. Labor unions, benefitting from what many consider to be a union-friendly NLRB , have undertaken significant efforts to inject themselves into such business relationships.

The most recent target of these efforts is fast-food giant, McDonald’s Corp. The General Counsel of the NLRB, who is the chief prosecutor for the labor board, has recently announced an effort to hold McDonald’s responsible for alleged unfair labor practices of its franchisees. The theory advanced by the General Counsel is that McDonald’s is a joint employer with each of its franchisees. Since it is partially responsible for certain terms and conditions of the employment of the franchisee’s workers, the General Counsel asserts, it should be held legally responsible for the remedy of labor law violations.

The General Counsel’s initiative is regarded by many as an aggressive move against the franchise model, which can be an impediment to union organizers. With 90% of McDonald’s U.S. restaurants owned by franchisees, union organizing there can face significant obstacles. Any change in the law that broadens the scope of joint employer theories would ease the ability of unions to successfully organize the employees of McDonald’s as well as other franchises.

The public lauding of the General Counsel’s decision by pro-union interests is evidence enough of the potential impact the McDonald’s case may have on business structures. For example, according to comments made to the New York Times by Wilma Liebman, former Chairwoman of the NLRB, the General Counsel’s decision to move forward against McDonald’s could make it easier to organize its restaurants and provide leverage in the well-publicized industry effort to have the minimum wage of fast food workers increased to $15.00 per hour. The McDonald’s case, however, is not the General Counsel’s first effort to broaden the reach of joint employer theories.

In M.B. Sturgis, decided in 2000, the NLRB’s General Counsel successfully persuaded it to overturn decades-old precedent and opened the doors to organizing jointly employed contingent and temporary workforces. While the M.B. Sturgis decision was reversed by the Bush Board in 2004, the underlying, ongoing effort to change the scope of joint employer law continues to resonate in the McDonald’s case.

In short, if the McDonald’s case is ultimately decided against the company, the impact might be felt by employers far outside the franchise model. What is an employer with an interest in exploring affiliations, alliances, franchises or similar ventures to do? Proper development of the structure of such business relationships, together with controls to maintain that structure in practice, are pivotal to limiting exposure to the changing landscape of joint employer liabilities.

If you have any questions about the labor and employment implications of the relationships your business has with other employers, please contact the author of this article or your Clifton Budd & DeMaria attorney.

About the Author
Scott M. Wich
Partner
Mr. Wich is a regional attorney focusing on providing local, regional and national clients with services concerning management-related labor and...
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