Sides Clash at McDonald's Joint Employer Hearing

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By John Herzfeld

March 10 — A hearing before a National Labor Relations Board administrative law judge on whether McDonald’s USA LLC is a joint employer liable for alleged unfair labor practices opened March 10 with a sharp exchange of views between lawyers for the NLRB general counsel and the fast-food chain.

The McDonald’s franchising structure gives it “a very specific level of control” over the wages, hours, terms of employment and working conditions of franchise employees, with company management training materials spelling out operational details down to how many seconds it should require to take a counter order, NLRB Region 2 attorney James Rucker asserted in opening statements.

But Willis J. Goldsmith of Jones Day in New York, representing McDonald’s USA, maintained that the NLRB general counsel has been working with the Service Employees International Union to make the chain a target of a national campaign to raise the minimum wage. The franchiser “is not now, has never been and won’t be” a joint employer, and its monitoring and advice don’t constitute control, he said.

The long-awaited trial on unfair labor practice charges brought against the company and various franchisees in six NLRB regions is expected to last months.

The consolidated proceedings are before ALJ Lauren Esposito in New York, with dozens of lawyers representing the NLRB regional offices, McDonald’s USA, respondent franchisees and the SEIU and other charging parties representing fast-food workers.

Case Seen as Symbolic

In the case, labor advocates are seeking to make fast-food outlets a symbol of the low-wage economy and hold McDonald’s USA liable for wages and conditions at company franchises.

Employer groups counter that the theory behind the joint employer bid would upend a longstanding, productive business model.

Rucker, in his opening statement, noted that the ULP charges had grown out of a series of one-day strikes mounted as part of an SEIU “Fight for $15” minimum wage campaign and that McDonald’s and its franchisees have actively opposed the wage drive.

The joint employer doctrine isn’t unusual or narrow but must be adjusted to present-day realities given that the matter has been revisited by the courts only rarely over the past 50 years, he said.

The general counsel’s argument focused on the role of “continuous monitoring” of franchisees by McDonald’s USA operations consultants and the efforts the company makes to hold the franchisees to principles laid out in its training materials.

Potential franchisees must pass the company’s Hamburger University management training program before taking up a franchise, Rucker said. Job classifications and duties are defined in the company’s management system and manual, he said.

Service Stopwatch?

The McDonald’s franchise agreement covers employee training and “every aspect of operation,” requiring franchisees to rely on company “formulas, methods and policies,” he said.

Specifications in training materials and software, for instance, call for counter service to be completed in three and a half minutes, including 20 to 25 seconds to take an order, 12 to 16 seconds to assemble it and 10 to 15 seconds to present it, Rucker said.

Another feature tells managers how to allocate jobs and responsibilities on a shift for any number of workers between one and seven, he said. Standards for cleaning and maintenance assignments are “just as exacting.”

In hiring, Rucker said, managers are guided by a human resources program that rates candidates into color-coded evaluation categories of green, yellow or red and provides sample interview questions.

The company’s website, in offering job opportunities, doesn’t distinguish between restaurants owned by McDonald’s USA and those owned by franchisees, he said.

Scheduling Software

The company also “inserts itself” into decisions to promote workers to shift manager or crew chief, Rucker said, and its software partially determines worker hours and restaurant staffing levels.

A “sales opportunity analysis report” feature sets a ratio between staffing and sales volume, based on data automatically collected from the franchisees and aggregated by McDonald’s USA, Rucker said.

The franchisees aren’t free to use alternative operations consultants or to ignore the advice of consultants provided by the company, he said. McDonald’s USA can terminate a franchise agreement if the franchisee doesn’t meet its standards, and the risk of termination is “not illusory.”

The company’s role, he said, isn’t as “a software provider” or “an academic institution.”

“In short, if McDonald’s is involved in determining working conditions at its franchised operations, it is responsible for what happens to workers subject to those conditions and is therefore liable for unfair labor practices which occur there,” he concluded, calling that “a straightforward and reasonable application” of the joint employer doctrine.

‘Ambush' Alleged

In his opening statement, Goldsmith said the general counsel’s position goes against case law that’s been decided for more than a decade and that “not one fact supports the general counsel’s legal theory, whatever it is.”

He asserted that the company had been subjected to “trial by ambush” and had learned of the facts the general counsel would allege “only in the last hour,” as Rucker presented his opening statement.

The company, Goldsmith said, had been denied due process by the board’s August decision denying its request for a bill of particulars spelling out the allegations in the case . Rucker’s “rapid-fire recitation” in the opening statements has “grossly exacerbated” the due process problems, he said.

By “every single legal theory” and “any existing standard,” McDonald’s USA would never be held to be a joint employer, he said.

Since its start in the 1950s, the chain has been widely publicized as a model franchise operation in the U.S. and around the world, with 3,900 franchise owners running 13,000 restaurants—90 percent of all McDonald’s locations, Goldsmith said.

“Never in this entire period has the general counsel said McDonald’s was a joint employer,” he said.

Every court that has examined the issue in the history of restaurant franchising has found that independent franchisees alone control all the essential decisions on the wages, hours and working conditions of the employees who work for them, he said.

Franchising is an established, mutually beneficial business model that has especially helped women and minority business owners, who make up nearly 50 percent of the franchisees, Goldsmith said.

Franchise liability is part of the business deal, he said, and McDonald’s USA “had no involvement whatsoever in a single allegation” of a violation by a franchisee.

He questioned why the SEIU hadn’t pursued organizing petitions at any single McDonald’s location, including the 25 restaurants within a four-mile radius of the union’s headquarters in Washington.

“Have an organizer get the cards signed and file a petition,” he said. “That’s exactly what Congress intended. There’s absolutely no reason meaningful collective bargaining couldn’t take place without McDonald’s at the table.”

The company, he said, doesn’t control the franchisees directly or indirectly and “would bring absolutely nothing to the table.”

Cites 2015 District Court Decision

Goldsmith pointed to a federal district court case in California decided in September as backing the company’s position that monitoring and advice don’t constitute control . That decision isn’t an outlier but follows “cases reaching precisely the same result that stretch back decades,” he said.

The company oversight is to protect the integrity of its brand, maintain food and service quality, and provide customer assurance, he said. The company’s use of 21st century technology, he added, “has no bearing on whether it’s a joint employer.”

Franchisees are independent business owners running their own operations, he said, adding, “If the general counsel had any idea what it means to be a franchisee, we wouldn’t be here.”

Joint employer status would force McDonald's to add a human resources staff of “thousands and thousands” to manage the employees of 3,900 small businesses, Goldsmith said. “That’s not possible,” he said, calling the general counsel’s stance “a fundamentally absurd position.”

Long Proceeding Expected

While the opening statements took about two hours, the ALJ proceeding is slated to last at least through the end of 2016.

Pointing to a joint employer case involving CNN technicians, Goldsmith noted that it’s still pending in a federal appeals court after 13 years .

“That could easily be the case here,” he said.

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com