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The National Labor Relations Board ("NLRB") rules that McDonald's, USA, LLC ("McDonald's") can be liable as a joint employer with its franchise operators for labor law and wage and hour violations.

In investigating the charges alleging McDonald's franchisees and McDonald's violated the rights of employees as a result of activities surrounding employee protests in an effort to increase employee wages, the NLRB found that 43 of the 181 charges had merit and McDonald's will be named as a respondent if the parties are unable to reach a settlement.

The charges filed with the NLRB alleged that McDonald's is a joint employer because it requires its franchise owners to strictly follow its rules on food, cleanliness and employment practices and that McDonald's often owns the restaurants that franchisees use. A company may be held liable as a joint employer based on the amount of control it exercises over third party employees. The greater the amount of control such as schedule setting, discipline implementation, payroll, etc. by the company over the third party employees, the more likely the determination that the company is a joint employer.

If the NLRB's decision is upheld it could have serious ramifications throughout the fast food industry as well as other employers that rely on a franchise model and open the door to unionization of fast food workers. The Service Employees International Union ("SEIU") has been funding and organizing protests by and in support of fast food workers. While the protests have focused publicly on the demand for an increase to $15 per hour, the real goal of the movement is for the SEIU to unionize the over 3.5 million fast food workers. This means that SEIU could potentially capture revenue of hundreds of millions of dollars in union dues annually.

Finally, the NLRB's decision will have a far reaching impact on other businesses that use subcontractors or temp agencies and could make them at least partly liable in cases of overtime, wage and hour or union-organizing violations.

Counsel to Management: Employers should carefully evaluate their relationships with third parties to determine whether they may be liable as a joint employer. For help or questions regarding joint employer liability, please contact The Saqui Law Group.

 

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