Mcdonald’s versus NLRB: The End of Franchising, or an Overdue Restoration of Countervailing Power?

Abstract

AbstractFollowing a series of national protests in support of an increase in the federal minimum wage, many fast food workers faced retaliation by their employers when they returned to work; schedules were changed, wages and hours were reduced, and some employees were terminated. These retaliatory actions resulted in a number of complaints being filed with the National Labor Relations Board alleging violations of the National Labor Relations Act. Several of the complaints were found to have merit and, additionally, in several instances both the immediate employer, the franchisee, and the corporate organization of which it was a part, the franchisor, were named as co‐defendants. This ruling—that franchisors like McDonald’s USA—could be held jointly responsible for the labor violations of independent franchisees reversed a long‐standing precedent, whereby franchisees were regarded as independent contractors solely responsible for day‐to‐day labor practices, including compliance with federal and state labor statutes. Critics of the ruling argue that it will open the door to unionization and may well spell the end of the service‐sponsor franchising format. Supporters of the NLRB argue that the ruling is just and reflects new “industrial realities” in retail labor markets. Further, a case can be made that the NLRB’s position represents a step in the direction of the restoration of more equitable balance of power between labor and management.