Lawmakers split along partisan lines during a Senate hearing Thursday on the National Labor Relations Board’s decision to treat McDonald’s as joint employer at its estimated 3,000 franchise locations.
The NLRB’s move has has been highly controversial, as it involves a potentially major expansion of legal liability for large corporations that franchise their businesses.
Sen. Lamar Alexander, chairman of the Health, Education, Labor and Pensions Committee, has been a leading critic, saying that the board’s actions could destroy “a small business opportunity for more than 700,000 Americans.”
“[F]ranchise companies will find it much more practical to own all their stores and restaurants and day care centers themselves” should the NLRB’s McDonald’s decision become the legal standard in the business community, the Tennessee Republican warned. That will mean “many more company-owned outposts, rather than franchisee-owned small businesses.”
Sen. Patty Murray of Washington state, the ranking Democrat on the committee, dismissed that, arguing that the current standard was worse for both workers and franchisees.
“The parent company of a franchise can dictate pricing and store hours. It can prohibit collective bargaining and it can monitor, in real time, worker hours and staffing levels. And yet, the parent company can put all the liability for poor working conditions and low wages squarely on the shoulders of its franchise owners,” Murray said. “Many of my Republican colleagues are defending a precedent that allows too many major corporations turn a blind eye to poor labor conditions.”
The NLRB is the federal entity that enforces labor law regulations. Its board members are nominated by the president and approved by the Senate, but it otherwise operates independently. No one from the NLRB testified at the Thursday hearing.
McDonald’s Corp. was officially charged by the NLRB in December with violations of labor rights at its franchise’s stores, with the board declaring the corporation was a “joint employer” at the stores.
The NLRB’s action — it had signaled as far back as July that it would take this route — sent shockwaves through the business community, because most franchises were previously understood to be privately owned, and therefore legally separate, entities. McDonald’s Corp., which is legally fighting the board’s determination, claims that 80 percent of its restaurants are private businesses that merely rent out the brand name.
Making franchisors legally responsible for their franchises will either result in corporations not offering franchising opportunities in the first place or only offering ones where the company maintains effective control, turning entrepreneurs into simple employees, critics say.
“I might as well go back to work for the large corporations because it has taken all of the control — all of the reasons that I wanted to be an owner to begin with — it takes all of that away from us. Those people who go into business and take that risk, we want that independence,” testified Gerald Moore, owner of a Knoxville, Tenn., Little Gym franchise.
Labor politics are a big factor in the NLRB’s case. The charges against McDonald’s involve alleged retaliation against employees for joining in protests organized by the Service Employees International Union, which has struggled to organize fast-food workers. Making the franchiser corporations joint employers would make organizing efforts easier by allowing labor groups to target one entity instead of thousands of individual businesses.
The NLRB currently has a Democrat-appointed majority. General Counsel Richard Griffin, who initiated the charges against McDonald’s, is a former top lawyer with the International Union of Operating Engineers.
