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Employment Law Summer Recap 2014: Part 10 of 11 - Derek Jeter and Big Macs: What Will Happen to Their Franchises Now?

Written by Michael Arnold

Sadly, for this writer, Yankee legend Derek Jeter’s playing days have come to a close. This summer we were able to watch the Captain and five-time World Series Champion take the final swings of his illustrious career where he finished 6th on the all-time hits list – a remarkable accomplishment. He also finished 7th in at bats, 9th in runs scored, 26th in games played, and 29th in doubles – out of 16,000+(!!!) players who’ve played in the major leagues. And to all those who say he was a defensive liability, I give you this, this, and especially this. Derek Jeter was the face of the storied New York Yankee franchise for the past 20 years all the way up until his “fantasy becomes reality” final at bat at Yankee Stadium. Things are sure going to look different next year without No. 2 at shortstop.

If the NLRB has its way, the McDonald’s franchise model could be changing as well.

In one of the biggest employment news events of the summer, the NLRB’s General Counsel Office charged McDonald's USA, LLC as a “joint employer.” In doing so, the NLRB wants to hold McDonald’s responsible for the unfair labor practices that occur in restaurants owned and operated by its franchisees, because, it claims, McDonald’s exerts sufficient control over the essential terms and conditions of employment of the franchisees’ employees.

Meanwhile, in a separate case, the Board is considering whether to replace its current “direct and immediate control” joint employer test with a “totality of circumstances” test, which would analyze whether a company exerts enough influence over the working conditions of the other company’s employees so that both companies need to be present for meaningful bargaining to occur. This new test would make it far easier to find a joint employment relationship, and if adopted by the Board, would likely apply in the McDonald’s case.

If McDonald’s is ultimately found to be a joint employer, it would shake the foundation of the franchise business model in the fast food industry and in the many other industries that rely on the franchise model (i.e. gas stations) – one that employs more than 8 million workers. It could also affect temporary staffing agencies and other subcontractors, and by affect, I mean it could completely obliterate their very existence. An adverse decision would increase a franchisee’s operational costs and eliminate much of the freedom they have to run their business – making it a far less attractive investment for individuals looking to own a small business. Not surprisingly, there has been significant push back from the franchise industry.

Of course, not everyone thinks this is a bad development. Proponents say that a change is necessary because it will allow lower wage workers who’ve been marginalized and fragmented by these business models to bargain more effectively and enhance their wages and other working conditions. In making this argument, they point to the fact that households employing a fast food worker are currently four times as likely to live in poverty, which ultimately costs the taxpayers who are forced to supplement these workers’ incomes with public benefits.

We still have a long way to go before this issue is resolved. It could take years before the NLRB decides the McDonald’s case, and then its reasoning would have to be endorsed by the courts. Congress may also decide to step in at some point with legislation aimed at reinforcing the franchise business model. So we don’t know what will happen just yet, but we will continue to monitor developments on this issue – an important one.

In the meantime, and as we wrote about previously, employers can and should take certain steps to reduce the risk of a joint employer determination.


Tomorrow: Part 11 of 11: Employment Law Summer Recap 2014: GOOOOOOOOOOOOOOOOOOOOOAL: the World Cup and Onionhead Capture America’s Attention...Briefly. For previous parts, click here.

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