Operations

Landmark joint employer test is back on

A judge rejected the proposed settlement that would have averted the need for courts to decide when restaurant franchisees and franchisors are joint employers.
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The risk of being held responsible for the employment practices of franchisees was revived for McDonald’s and other franchisors Tuesday when a National Labor Relations Board judge blocked the settlement of a case requiring clarification of the term “joint employer.”

McDonald’s and several franchisees had hammered out the accord with employees in May to resolve a lawsuit that asserted McDonald’s was a joint employer of the workers. None of the plaintiffs worked for McDonald’s USA or McDonald’s Corp., but the suit alleged the franchisor was still liable for infractions of wage and hour laws because of the strong control it wields over the practices and policies of franchisees.

The case was viewed as a landmark action that would define when franchisor and franchisees could be legally regarded as joint employers. Franchisors fear that a broad definition would bring an avalanche of lawsuits from franchise employees eager to plumb the deep pockets of a national brand’s owner, and have warned that the franchise model could be irreparably damaged. The settlement shelved the joint employer question, providing restaurant chains and other franchised businesses with a chance to push for a narrow definition through rule-making or legislative means.  A bill narrowly defining the concept has been approved in the House of Representatives but has stalled in the Senate.

Lawsuit settlements are often rubber-stamped by the presiding court because the litigants have already agreed to the terms. NLRB Administrative Law Judge Lauren Esposito said she could not OK the settlement in the McDonald’s case because it was unclear if an agreement had actually been reached. “Certain fundamental elements of any effective settlement are lacking,” she wrote. General Counsel and McDonald’s have made so many conflicting statements regarding McDonald’s obligations under the proposed settlements that there is significant doubt as to whether they have actually reached agreement.”

The agreement called for awarding back pay to the plaintiffs, who alleged they’d drawn retribution by several McDonald’s franchisees for participating in a national Fight for $15 demonstration for a $15 minimum wage. Few other specifics of the deal have been disclosed.

Esposito’s rejection of the settlement drew praise from Fight for $15, even though affiliated McDonald’s workers had accepted the pact.

“Today’s decision confirms what has been evident for months—that this proposed settlement was nothing more than a sham hammered out between McDonald’s and the Trump administration in an effort to hand the company a get-out-of-jail-free card for illegally harassing, surveilling and firing minimum-wage workers who joined together and spoke out for a better life,”  Mary Joyce Carlson, counsel for Fight for $15, said in a statement.

McDonald’s and the NLRB did not respond by post time to requests for comment.

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