NLRB Office of General Counsel Alleges Franchisor Is Liable for Claims of Its Franchisees' Employees

On December 19, 2014, the National Labor Relations Board's (NLRB) Office of General Counsel took another step forward in its effort to erase the line between franchisors and franchisees. In a controversial move, the Office of General Counsel announced that it would start litigation against a franchisor and seek to hold it liable for its franchisees' employees' unfair labor charges.

In July, the Office of General Counsel announced that it would require McDonald's USA, LLC, together with several of its franchisees, to answer unfair labor charges concerning the franchisees' employees. With that decision, which drew heavy criticism from the franchise and broader business community, the Office of General Counsel signaled that if the parties did not settle the franchisees' employees' unfair labor charges, it would name the McDonald's franchisor as a respondent in subsequent litigation on the theory that it is a "joint employer."

On December 19, 2014, the Office of General Counsel carried through on that promise. In a mid-day press release, it announced that it had issued 13 complaints "against McDonald's franchisees and their franchisor, McDonald's USA, LLC, as joint employers." The complaints allege various unfair labor practices, including discriminatory discipline, terminations, reductions in hours and "other coercive conduct" directed toward employees who engaged in unionization activities. 

In justifying its decision to name the McDonald's franchisor as a joint employer, the Office of General Counsel asserted that its investigation found that the franchisor "through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees' operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations of" the National Labor Relations Act. In further justification, the Office of General Counsel cited unspecified actions that the McDonald's franchisor took in response to "worker protests to improve their wages and working conditions."

Importantly, the Office of General Counsel does not have the authority to decide cases or make law; it can only make allegations. In announcing that it had issued complaints naming the McDonald's franchisor as a respondent, the Office of General Counsel ensured that its "joint employer" allegations will land before a decision-maker sometime in 2015. Unless the parties reach a settlement within the next few months, the Office of General Counsel will commence litigation on March 30, 2015, before an administrative law judge. Either party can appeal the administrative law judge's decision to the full five-member NLRB in Washington, D.C. and then to a federal circuit court.

The December 19, 2014, decision comes as the NLRB continues to deliberate the case of Browning-Ferris Industries of California, Inc., in which many observers expect that the NLRB will adopt a new, broader standard for joint-employer liability. That decision could have far-reaching consequences for any company that has significant interaction with another entity's employees—particularly staffing agencies—by making it easier for employees to hold multiple companies liable for unfair labor practices. The attorneys at Faegre Baker Daniels will continue to monitor developments and keep you updated.