McD’s sued under ‘joint employer’ ruling for alleged discrimination at franchised stores

The National Labor Relation Board’s designation of McDonald’s USA as a “joint employer” has landed the franchisor in a lawsuit alleging racial discrimination at three franchised stores in Virginia.

The action in effect asks a federal court to hold McDonald’s responsible for hiring and firing employees of the restaurants, which are wholly owned and operated by a franchisee, Soweva Co., a business owned by Michael Simon.

It was filed in the U.S. District Court for the Western District of Virginia by 10 former Soweva employees. But the NAACP and the Fight for 15, a union-backed labor-advocacy group pushing for a $15 hourly minimum wage, have said they are supporting the effort.

It was not clear what form that support would take, but the two groups appeared to be the parties that organized a press conference after the filing was announced. During that conference, a NAACP representative said his group was not funding the legal action. A representative of the organization behind Fight for $15, New York-based Fast Food Forward, declined to answer the question.

The suit alleges that Soweva was hostile toward African-American workers and fired 12 of them without legal cause last May. In a press release announcing the suit, the NAACP and Fight for $15 accused Soweva’s store-level managers of saying such things before the dismissals as the store was “too dark” and they needed “to get the ghetto out of the store.”

The stores are located in Clarkesville and South Boston, Va.

In a statement issued after the lawsuit was announced, McDonald’s USA said, We have not seen the lawsuit, and cannot comment on its allegations, but will review the matter carefully. McDonald’s has a long-standing history of embracing the diversity of employees, independent Franchisees, customers and suppliers, and discrimination is completely inconsistent with our values.”

The legal action will be closely watched by the restaurant industry, because it is the first high-profile test of the NRLB’s recent decision, a reversal of a longstanding legal principle in franchising.

Previously, such labor issues as hiring, firing and scheduling had been regarded as the province of franchisees, since those activities are local in nature. Case law, validated as recently as last summer, had not held franchisors responsible for lapses in wage and hour laws.

The NLRB’s general counsel reversed that tradition on Dec. 19, saying that employees alleging misdeeds by a franchise also could seek redress from the franchisor.

The franchise community fears that the change in principle will prompt franchisors to curb their liability by decreasing or foregoing franchise development. Franchisors also have voiced worries about drawing lawsuits because the potential payoff could be much greater for plaintiffs than what they could collect from a franchisee.

Putting the focus on the franchisor is also seen as an effort by groups like the Service Employees International Union to concentrate their organization efforts on one big corporation rather than hundreds or thousands of small-scale franchisees.

The suit against McDonald’s “is yet another flailing attempt by the SEIU to build on the flawed reasoning of the NLRB’s general counsel: to exert a non-existent joint employer status on a company and achieve their stated goal of dismantling the franchise relationship to organize workers,” the International Franchise Association said in a statement.

The suit filed against Soweva and McDonald’s USA also names Simon and McDonald’s Corp. as defendants.

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