July 15, 2014
By Neal Tepel
Washington, DC – A major Lydia DePillis Washington Post piece has highlighted two potential NLRB cases that have the fast-food industry in a panic. An NLRB win for fast-food workers fighting for collective bargaining in these proceedings may be a game changer. The decisions could be a major strike against corporations that try to hide from responsibility for workers' wages behind a 'franchise model cover' or a temp staffing agency defense.
The results of these cases could find corporations as McDonald's, Burger King and Wendy's to be "joint-employers." Parent companies would then be liable and responsible for decisions made at the local level.
A former McDonald's exec admits in the Lydia DePillis article that the fast-food giant's franchise model leaves franchisees squeezed with little choice but to pay the bare minimum and carry out policies of the national corporation. Essentially It is the parent company not the affiliate that sets wages and policies. The article states, "In a somewhat unusual arrangement, McDonald's even controls its own real estate and extracts exorbitant rents from its franchisees, who are on the hook for expensive renovations. All that has driven profit margins down to the point where former McDonald's executive Richard Adams, now a consultant, estimates that about a quarter of franchises don't even generate positive cash flow for the owner. That doesn't give them many options."
Stakes are high. The outcome of either proceeding — or both — could significantly restructure the American franchise workplace. And that has the employer community and industry associations now watching the proceedings closely. If parent companies become "joint-employers" they are liable for actions of their affiliates at the local level.