In a decision that could expose franchisors and franchisees to increased liability, the National Labor Relations Board decided that a slew of complaints from workers’ organizations can name McDonald’s Corp. as a joint employer. In the past, restaurant franchisees have been identified as employers, while franchisors like McDonald’s have been able to shield themselves from issues such as wage disputes.
The labor board’s decision could also mean that franchisees are treated as large employers rather than small business owners. As the International Franchise Association put it, “If franchisors are joint employers with their franchisees, these thousands of small business owners would lose control of the operations and equity they worked so hard to build.”
Franchisees own and operate most of McDonald’s restaurants. However, the labor organizers who have filed complaints against McDonald’s claim that the franchisor exerts control over almost every aspect of how the franchised locations are run.
The complaints against McDonald’s come as restaurant employees seek to unionize and push for a minimum wage of $15 an hour. In Seattle, franchisees have filed a lawsuit claiming they should not be subjected to the same requirements as large employers. Particularly, the franchisees are fighting against having to pay the city’s new $15 minimum wage before other small businesses have to.
Unfortunately, franchisor-franchisee relationships can become adversarial. When a franchisor’s reach extends too far into a franchisee’s operations, there may be unforeseen repercussions, such as the ones observable in the ongoing McDonald’s cases. It is a good idea, then, for franchisees to have strong legal representation to help limit liability and protect profits.
Source: Associated Press, “McDonald’s could be liable for labor practices,” Candice Choi, July 29, 2014