McDonald's appeal to NLRB fails

by Erica Shaffer
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WASHINGTON – Oak Brook, Ill.-based McDonald’s Corp. lost an appeal to dismiss allegations that the company is a joint employer. In a 3-2 vote last week, the National Labor Relations Board also denied a request by McDonald’s to receive a detailed explanation of why the company qualifies as a joint employer with its franchisees.

In 2014, the NLRB Office of the General Council ruled that McDonald’s is a joint employer and can be held jointly liable for labor law and wage violations committed by its franchisees. The case went to administrative law judge Lauren Esposito who denied McDonald’s request for dismissal and a “bill of particulars” — a detailed explanation from the general council of why the company now qualifies as a joint employer under a new NLRB standard. The company argued that the general council is changing the joint employer standard, but supplying vague complaints to support its allegations that McDonald’s violated the standard.

Three members of the panel disagreed. “… we find that the allegations in the complaint are sufficient to put McDonald’s on notice that the General Council is alleging joint employer status based on McDonald’s control over the labor relations policies of its franchisees,” Chairman Mark Gaston Pearce, and board members Kent Hirozawa and Lauren McFerran wrote in their opinion.

Voting in favor of granting McDonald’s request were Philip Miscimarra and Harry Johnson III. In a strongly worded dissent, the two board members said the NLRB’s ruling presented significant due process problem.

“Not only should Respondent’s motion be granted on the merits, this is far preferable to having years of litigation in a large consolidated case, following which a court may decide that the entire case must be dismissed based on deficiencies in the complaint.”

The dissenting board members also argued that the decision could result in wasted resources by the NLRB, writing “Given the massive scope of this case, the Board should do everything reasonably necessary to ensure that it is litigated and decided once. Having this case overturned based on denial of due process at the complaint stage would poorly serve the Board and produce a terrible injustice for the parties, in addition to causing substantial harm to other employees, unions and employers for whom — in a world of finite resources — the Board’s assistance may be denied or delayed.”

Stakeholders in the foodservice industry argue that making franchisors liable for the actions of their franchisees completely changes the franchisor-franchisee relationship and could lead to less entrepreneurship and job creation in the industry. McDonald’s is expected to appeal any decision that classifies the company as a joint employer.
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