By Jacob Gershman 

An attorney for McDonald's Corp. told a federal administrative judge the company is a victim of a union-orchestrated attack on its brand, as legal proceedings got under way in a labor dispute that could upend the relationship between big retailers and their franchisees.

At issue in the hearings is whether companies like McDonald's Corp. share responsibility for the actions of their franchisees, particularly regarding complaints about low wages paid to fast-food workers.

The National Labor Relations Board's general counsel, an Obama administration appointee who functions as the nation's chief labor law prosecutor, determined in July that in the case of McDonald's, the answer is yes. He later issued complaints alleging the fast-food company and several franchisees 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.

Depending on how the case plays out, the dispute could make it easier for labor unions to organize fast-food workers and negotiate wages and expose franchisers in a range of industries to greater liability in labor matters.

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 their franchisees. Currently a parent company would have to have direct and immediate control over personnel matters like hiring and firing. The case could decide whether it is enough that the parent exercises control over quality, the brand and training.

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 Chicago and Los Angeles. Judge Lauren Esposito, a former NLRB field attorney and labor union lawyer, is presiding over all three.

An issue that flared on Monday was whether McDonald's should be allowed to subpoena investigative and communications firms retained by the union to assist with SEIU's worker-rights campaign. The company argued that it has the right to know more about the motives behind the campaign.

"We believe we have the right to defend our company from these relentless attacks," Jones Day partner Willis Goldsmith, who represents McDonald's, told Judge Esposito.

Attorneys representing the NLRB's general counsel, SEIU and companies the union hired to assist with its worker rights campaign told the judge that McDonald's didn't have a right to those documents. The judge didn't rule on whether to revoke the subpoena.

David Dean, a member of SEIU's legal team, said in an interview that McDonald's scrutiny of the firms shows that it "has in essence been caught involving themselves intimately in labor relations at their franchise stores."

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.

It could take months before the judge in the McDonald's case issues a ruling. If she rules against McDonald's, the company is expected to appeal the dispute to the NLRB's full five-member board in Washington. 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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