By Jacob Gershman
A federal administrative law judge Monday took up the regulatory
question underlying complaints about low wages in the fast-food
industry: whether companies like McDonald's Corp. share
responsibility for the actions of their franchisees.
The National Labor Relations Board's general counsel, who
functions as the nation's chief labor law prosecutor, determined in
July that McDonald's could be treated as a joint employer with its
franchisees. In December, the NLRB general counsel issued
complaints against the fast-food giant along with several
franchisees alleging they violated the rights of restaurant workers
who participated in activities to improve wages and working
conditions.
The moves were the latest in a fraught relationship between U.S.
corporations and the labor board and come as pressure is building
to give low-wage workers raises.
Monday's proceeding in Manhattan is the first of several
consolidated hearings to address the general counsel's complaints.
Others are scheduled to take place in May and June in Chicago and
Los Angeles. Administrative Law Judge Lauren Esposito, a former
NLRB field attorney and labor union lawyer, is presiding over all
three.
Fast Food Forward, a group backed by the Service Employees
International Union, has been organizing demonstrations at
McDonald's and other fast-food restaurants, demanding a $15 hourly
minimum wage and the right to form a union.
A key question is determining when a corporate brand-owner like
McDonald's becomes jointly responsible for labor violations at its
franchisees. Currently a parent company has to have direct and
immediate control over personnel matters like hiring and firing.
The case could decide if quality and brand control measures and
training activities can also trigger joint-employer liability.
Unions say the standard needs to change to address arrangements
in which one company exercises control over another but has little
responsibility for its workers.
McDonald's maintains that its franchisees, which own 90% of
McDonald's more than 14,000 U.S. restaurants, set their own wages
and control working conditions. It has wielded that argument as it
faces intensifying labor protests and mounting lawsuits over worker
conditions.
Trade groups such as the International Franchise Association say
that treating franchisers as joint employers undermines a
long-established and good business model that gives store owners
autonomy. They also worry it would make fast food and other
industries more vulnerable to campaigns by union-backed groups that
seek to organize workers.
Businesses and unions are also awaiting a ruling in a separate
case before the NLRB--involving subcontracted workers at a
recycling processing facility--that could set a broader precedent
that could influence the judge and the board's decision in the
McDonald's cases.
If the judge rules against McDonald's, the company is expected
to appeal the dispute to the NLRB's full five-member board in
Washington, D.C. The battle could then head to a federal appeals
court. The dispute may ultimately get decided by the U.S. Supreme
Court.
Write to Jacob Gershman at jacob.gershman@wsj.com
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