Joint Employer Status, Franchise Business Model, and Employee Management

The case of whether McDonald’s is considered a joint-employer alongside its franchisees has been brewing and building for the past few years. McDonald’s finally headed to trial in March 2016, and is arguing against the National Labor Relations Board judgments. There has been much speculation around this case including what the long-term affects on the franchise business model will be, how employees will be managed, and how liability will be shared should McDonald’s be held to joint-employer status.

It has been stated that the results of this ruling could have an impact on other industries as well that utilize the franchise business model. The model as we know it will be forever changed if joint-employer status becomes the new standard. Labor board critics, along with the International Franchise Association, have stated that they believe creating an environment in which franchisers are treated as joint employers negates from the storeowner’s autonomy. A ruling in favor of joint-employer status would also mean that McDonald’s would be held liable along with its franchisees for illegal practices committed by the franchise owner including unpaid wages, unpaid overtime, and other labor related violations.

Lawyers for several McDonald’s franchisees gave examples of how each franchise location or franchise chain sets their own hiring, firing, and pay terms without consulting the parent company. In the past, a parent company had to have demonstrated control over decisions like these to be considered a joint-employer; however, the case currently in progress will decide if regulations like brand management, quality assurance, and training establish enough control to qualify the franchiser as a joint-employer.

In theory, joint-employer status it would make it easier for unions to organize workers and bring the franchiser into negotiations regarding wages, and other labor matters. Shifting of liability from franchiser to the franchisee is one of the main reasons companies opt to utilize the franchise business model. Since McDonald’s is roughly 90 percent franchised, the joint-employer status would mean big changes with large implications.

Labor unions and worker organizations have held the view that companies like McDonald’s should be held to joint-employer status. They argue these large companies heavily influence working conditions. They also see it as unfair that the large companies use the franchise business model to insulate themselves from what they claim are their legal responsibilities to workers. These organizations like Fast Food Forward group organized protests against McDonald’s to gain $15 hourly minimum wages, and the right or organize/unionize without retaliation.