McDonald’s free from liability for franchise labour violations

BLOOMBERG – McDonald’s has won a huge victory in a multi-year legal battle over whether it should share responsibility for alleged labour violations in its franchisees’ restaurants, a case that posed a major threat to the franchise model underlying one of the largest employers in the world.

The federal labour board in a two-one ruling on Thursday ordered an agency judge to approve a roughly USD170,000 settlement between McDonald’s franchisees and their workers that also absolves the fast food giant from any direct responsibility as a joint employer – the central goal of Obama administration officials who initiated the prosecution.

The Republican majority board’s decision signals that the agency is unlikely to hold franchisers and companies that rely on contracted labour liable for labour law violations at their subsidiaries’ workplaces without strong evidence that the parent company directly controls the workers involved.

The settling of the case – which an agency judge said is the “largest case ever adjudicated” in the history of the National Labor Relations Board (NLRB) – also marks a significant setback for the labour movement. Worker advocacy groups and the Obama administration have backed the litigation against McDonald’s in hopes of a landmark ruling that could have been used to compel major franchisers and others bargain collectively with employees and share liability for workplace law violations.

The union-allied Fight for USD15 and associated groups began filing unfair labour practice charges to the NLRB against McDonald’s in 2012, in conjunction with a protest and organising campaign for higher wages and union rights. The charges generally alleged that McDonald’s franchisees fired and retaliated against employees for supporting union activity.

The groups argued that McDonald’s shares control over the workers in its franchisees’ restaurants, and also should share liability. The company disputed that it has sufficient say over the franchisees’ and workers in their restaurants to be considered a joint employer. The NLRB reversed course in the case after United States (US) President Donald Trump’s appointees to the agency took over. NLRB General Counsel Peter Robb paused the case just days before arguments closed in front of an agency judge. Lawyers in Robb’s office then hashed out a settlement offer with McDonald’s over objections from Fight for USD15.

NLRB Administrative Law Judge Lauren Esposito rejected the proposed settlement as inadequate. The two-one board ruling overturned Esposito’s decision and approved the settlement.

Board Chairman John Ring and member William Emanuel were asked to recuse themselves from the case because they came to the NLRB from law firms that had helped McDonald’s counter Fight for USD15 actions. Ring wasn’t on the three-person panel that decided the case, so the issue was moot as to the chairman; and Emanuel considered the motion but decided to participate, the board said.