August 2014

By: Walter J. Liszka, Esq.

The first “nail in the coffin” in doing away with the franchisor/franchisee relationship and jeopardizing a vast number of small business operators in this country (estimated at a little over 85% in the restaurant industry), has been “nailed” by the National Labor Relations Board (NLRB) General Counsel. Robert F. Griffin, Jr., who was sworn in for a four (4) year term as General Counsel of the NLRB on November 4, 2013 and, as an aside, was a NLRB member from January 9, 2012 through August 2, 2013, has issued notifications to various NLRB Regional Offices that they are authorized to proceed with forty-three (43) complaints of Unfair Labor Practices against not only the franchisees of the locus of the dispute but, as well, against McDonald’s, USA as a “joint employer.” While there were a vast number of complaints filed against McDonald’s franchisees and McDonald’s since November 2012 (a total of 181 complaints), in his own authoritative way, General Counsel Griffin has authorized not only the issuance of the aforementioned forty-three (43) complaints but continuing investigation of sixty-four (64) other cases by his office to see if complaints should issue in these cases.

It is extremely interesting to note that the General Counsel’s action runs parallel to the consideration by the NLRB in a separate and distinct matter (Browning-Ferris) as to whether or not the current standard used by the NLRB (currently legally separate and distinct business entities that in unison exert a significant and direct degree of control over employees and their essential “terms and conditions of employment” are considered as joint employers) should be changed. Under the approach being taken by the General Counsel, he wants to change that standard even though there is in place a very distinct and currently legally enforceable franchise agreement between McDonald’s and its franchisees that requires the franchisees to comply with certain requirements dealing with food purchases and preparation of foods to protect the McDonald’s brand, but cedes to the individual franchisees all control over hiring, firing, and determining the terms and conditions of employment of their employees.

While the directive of the General Counsel of the NLRB is not law and, in fact, does not have to be followed by the NLRB itself, it is indeed curious that it comes out in parallel to the current pending of the Browning-Ferris case. There may be other very serious issues for employers, be they a franchisor or franchisee, with regard to the actions of the NLRB General Counsel.

As everyone is well aware, there is afoot a ground swell of employee protests against McDonald’s and various other fast food entities for an increase in the minimum wage. This effort is being strongly supported by the Service Employees’ Union. Companion to this effort to increase the minimum wage through employee protests, the “all omnipotent President Obama” has seen fit to issue another of his numerous Executive Orders increasing the minimum wage for employees of all federal contractors. Are these merely concentric circles that are spinning on their own axis in the night with no connection? If any reader of this article believes that, the author has some real cheap land in Florida because it is under water!

There is no doubt in the mind of the author that should NLRB General Counsel Griffin’s approach on joint employer status gain traction, it will quickly be adopted by other federal governmental agencies (EEOC and USDOL Wage and Hour Division) with regard to their investigations of “joint employers.” Certainly the next few years of the Obama Administration and his “lap dog” appointees in all government agencies are going to be very interesting.

Questions? Contact Founder and Senior Shareholder Richard H. Wessels of Wessels Sherman’s St. Charles office at (630) 377-1554 or by email at rwessels@wesselssherman.com.