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AAFD Member Alert: NLRB General Counsel Finds McDonald’s USA may be Joint Employer of Restaurant Employees – Important Implications for US Franchise Owners

Posted on Date: Aug 1, 2014


On Tuesday, July 29, 2014, the General Counsel to the US National Labor Relations Board (NLRB) issued an opinion that McDonald’s Corporation could be deemed to be the joint employer of thousands of line employees at McDonald’s restaurants due to the amount of control that McDonald’s exercises over its franchise operators.

Here is a link to the NLRB release:

AAFD Chairman, Robert Purvin issued the following statement to MSNBC: “The AAFD has been arguing for years that franchisor control of franchisee conduct places great stress on the validity of an independent contractor relationship, such that franchise owners (and their employees) may well be deemed to be employees (or indentured servants) of their franchisors.  So it sounds like this is a shoe I have expected would finally drop.  The franchising community needs to take stock of the separation of authority that needs to be present to create a contractor vs. an employer relationship.”

An MSNBC article by Tim Noah has quoted Purvin. The article examines the issue and applauds increased government scrutiny of independent contractor relationships in franchising.

The AAFD seeks to protect franchisee rights to operate as independent businesses, and to protect franchisee business ownership equity. The evolution of franchisor control of franchise systems has continually eroded franchisee rights and equity. The NLRB decision suggests that some franchisors, like McDonald’s, may have crossed a line that destroys the claim that owner-operators are independent business owners.

Although not the first decision of its kind, the NLRB opinion is a ground shaking event that is reverberating within the franchising community.  In the past, the US Small Business Administration declined to treat certain franchises as small businesses due to excessive franchisor control, and the US Department of Labor has also found the presence of employer relationships in some models that claim to be franchises. Some recent court decisions, particularly in the janitorial business sector, have reclassified franchisees as employees.

The International Franchise Association has issued at least two statements regarding the NLRB action.

The IFA issued a Smart Brief on the subject on July 30: “The National Labor Relations Board voted that McDonald's will be a joint respondent in 43 complaints filed against independent operators. “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," said IFA President and CEO Steve Caldeira. "The jobs of millions of workers would be placed in jeopardy, and the value of the businesses that employ them would be deflated." (7/29), The Wall Street Journal (tiered subscription model) (7/30), The Examiner (Washington, D.C.) (7/28), Politico/The Associated Press (7/30), Bloomberg Businessweek (7/29.

Stuart Hershman, counsel to the International Franchise Association has issued the following response to the NLRB action to the American Bar Association Forum on Franchising,

“On behalf of the IFA, I can assure you that the IFA is dealing with this issue head-on in all appropriate venues and on all appropriate fronts.  Everyone understands what really is behind this NLRB initiative, what it means for franchising, what education is necessary to inform the ill-informed, and what steps must be taken over the appropriate timeframe and through the proper channels to achieve the results all franchising advocates desire.”

The AAFD will be following this matter closely. Our goal is not for franchisors to be deemed employers of thousands of small business workers, but to claw back the traditional rights of small business ownership, and equity ownership, that will validate a finding that franchise ‘owners’ are, in fact, independent contractors and business owners.



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