A National Labor Relations Board memo this week has drawn strong concern and criticism as it warned that McDonald’s could be legally liable as a “joint employer” along with its franchisees for employment practices.
Media coverage sounded alarms that such a change would redefine the basic franchise business model, and that it could have a “massive ripple effect” beyond McDonald’s. As this summary from FranchiseGator puts it, “such a stance goes against the very fabric that franchising to this day has been built upon.”
To be clear, the memo is a warning – not a ruling – that stemmed from labor complaints at some McDonald’s locations. “If the parties cannot reach settlement in these cases, complaints will issue and McDonald’s, USA, LLC will be named as a joint employer respondent,” the memo read.
The International Franchise Association was quick to condemn the move.
“The NLRB’s Division of Advice recommendation that franchisors and their franchisees be designated as joint-employers is both wrong and unjustified,” said IFA president Steve Caldeira. “This legal opinion would upend years of federal and state legal precedent and threaten … millions of jobs … due to the radical and unprecedented nature of this decision.”
“Franchisees and their employees do not work for franchisors,” Caldeira said, explaining the IFA’s logic. “The franchise owners who have built more than 770,000 businesses and employ millions of people control their own businesses.”
“Franchisees have their own employer identification number with the Internal Revenue Service and file their own taxes,” he continued. “Franchisees establish day-to-day operations, employment practices and policies for their own businesses. Franchisees decide who to hire and fire, and also set wage rates, benefits and employees’ work schedules.”
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