Here at Wonkblog, we've talked a bit about how the franchise model makes it difficult for workers to organize, keeping wages low by giving franchisees such low margins that increasing them is nearly impossible. A few weeks ago, we previewed the National Labor Relations Board proceedings that might deem franchisors liable for violations of labor law, preventing big companies like McDonalds from hiding behind the "small businesses" they say actually call the shots.
Today, the NLRB's general counsel made his decision: McDonald's, at least, controls its franchisees to such an extent that it qualifies as a joint employer. Out of 181 cases that have been filed against McDonald's nationwide, the general counsel found that 43 had merit and 68 were baseless, with 64 still pending investigation. Regional offices will now adjudicate complaints, with McDonalds not as a blameless side character, but squarely accused.
That's a big change, with potentially far-reaching implications for the ability of millions of low-wage workers to join a union. And the Fast Food Workers Committee, which levied the complaints against McDonalds in New York that led to the general counsel's determination today, was downright triumphant.
"McDonald's can no longer get away with reaping all the benefits and the profits while saddling their franchises with all the risks and the costs," said Micah Wissinger, an attorney with the firm Levy Ratner, who brought some of the cases in New York.
McDonald's, obviously, disagrees -- it's planning to contest the general counsel's determination, which would require a hearing to resolve before complaints can go forward. Even if it loses, it's possible the company could make enough changes to its relationship with franchisees that the joint employer standard would no longer apply.
"Every one of these cases is on the facts of this case," says Alan Hyde, a professor at Rutgers Law School who authored a brief on the joint employer question in another case. "They will react by changing some details in the contract and daring the unions and the Board to come after them."
For now, though, the industry is preparing for the worst. Everybody else who depends on the franchise model reacted immediately with rage and prognostications of doom.
"Millions of jobs and the livelihoods of hundreds of thousands of independent franchise small businesses are now at risk due to the radical and unprecedented nature of this decision," said Steve Caldeira, president and CEO of the International Franchise Association, in a release. "Ruling that franchises are joint-employers will be a devastating blow to franchise businesses and the franchise model."
The National Retail Federation predicted that the decision could hurt workers, not help them.
“The last thing this economy needs is decisions like this which merely serve to stall job growth and diminish much needed capital investment," said David French, the trade group's senior vice president of government relations. "When a government agency unilaterally decides to unravel the long established and successful business relationships between franchisees and franchisors, the entire business community reacts. And the very people the NLRB was established to protect – American workers – may be the ultimate losers in this decision as those same businesses reconcile with an uncertain future.”
On a press call, National Employment Law Project general counsel Catherine Ruckleshaus downplayed that concern -- the determination simply allows McDonalds to be found liable for infractions like jilting workers of their wages and retaliating against those who went on strike. But wait: How exactly does that help them form a union?
In theory, it's easier to form a bargaining unit and hold a union election if it's clear that one large company could be party to it, rather than just a bunch of little employers. Right now though, the Fast Food Forward campaign is being cagey about how they'll proceed. On a press call, campaign director Kendall Fells explained they might not want to hold an election at all. Certainly, the process has proven sclerotic and risky before.
"We're not convinced that we want to have elections at these stores, we're not convinced we want to have a card check," he said. "This campaign is about highlighting the workers that work in these stores and the conditions they work under. What we're talking about is having these corporations come to the table and have a conversation about what workers want, which is $15 an hour, and a union."
It may be wishful thinking to presume that the world's largest franchisor would simply recognize a union without being forced to do so. But the general counsel's finding makes it much harder to avoid.