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Joint employer decision pushed off by McDonald's deal

Restaurant chains were shielded from a significant legal risk today when McDonald’s settled a National Labor Relations Board dispute defining franchisors as joint employers of franchisees’ workers.

The Oak Brook, Ill.-based quick-service giant confirmed the settlement in an email statement Monday afternoon.

“The settlement allows our franchisees and their employees to move forward, and resolves all matters without any admission of wrongdoing,” a company spokesperson said in the email, noting that current and former franchisee employees involved in the proceedings “are receiving long overdue satisfaction of their claims.”

“As it has maintained throughout the process, McDonald’s USA is not and never has been a joint employer with its franchisees,” the company added. “We believe this is a major first step in ending this wasteful, multiyear litigation,” McDonald’s said.

An administrative law judge in New York has yet to approve the settlement. 

The development was the latest twist in the struggle between unions and restaurants over whether franchisors should be held responsible for the labor practices and policies of franchisees. Establishing that notion of joint employer, as the NLRB did in 2014, would expose deep-pocketed franchisors to a host of litigation and regulatory dealings. The franchise community warned that the risks would upend the franchise model and significantly brake restaurant development. The McDonald’s dispute was a key test case of whether the designation of franchisors as joint employers would hold.

The NLRB overturned the broad joint-employer definition in mid-December in a separate complaint involving a company outside the restaurant industry. But that decision was vacated several weeks ago because the matter had been heard by an NLRB director with an alleged conflict of interest. The broad joint employer standard was reinstated.

After the December decision by the NLRB, a judge in New York City granted McDonald’s and its accusers a 60-day period to hammer out a resolution. Because the complainants’ case pivoted on the overturned joint employer standard, their chances of winning looked slim. A settlement was expected.

But with the reinstatement of the broad definition, the plaintiffs’ chances instantly rebounded. According to news reports, Department of Justice officials worried that a victory would reaffirm the definition of joint employer favored by labor advocates, putting franchisors again at risk.

The complaint filed with the NLRB contends the employees of several McDonald's franchisees were illegally fired for participating in a demonstration convened by the Fight for $15, a union-backed drive to raise local and state minimum wages to $15 an hour. 

Under the settlement, the discharged employees will be provided with back wages, according to a statement issued by the NLRB. It did not specify if the back pay would be provided by McDonald's or the franchisees.

The agreement comes as industry trade groups are pushing the Senate to pass legislation that would establish a narrow definition of joint employer as law, averting further about-faces because of NLRB decisions.

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