The NLRB is Changing the Definition of an Employer to Make It Easier for Unions to Organize Fast Food Workplaces

By Diana Furchtgott-Roth

In The Trial, written a century ago in 1914, Franz Kafka paints a portrait of an unimaginably oppressive government with secret laws and trials in which the individual is crushed. Today, in 2014, Kafka would not have to invent these circumstances. He could find them in real life, at the National Labor Relations Board. It’s up to the 114th Congress to keep the NLRB in check.

On Friday, just before the holidays, NLRB General Counsel Richard Griffin announced that he had issued complaints against McDonald’s franchised restaurants and McDonald’s USA, the parent corporation, as joint employers.  Workers complained that they were unfairly disciplined in retaliation for communicating with unions, including facing threats, fewer work hours, and job loss.

In July Griffin stated (without offering a legal argument) that McDonald’s USA was a joint employer of those workers who are employed by local McDonald’s franchises, but he waited until last week to bring charges against the parent company. Before his appointment as general counsel, Griffin was one of the unconstitutional recess appointees to the NLRB, whose appointment was overturned by the Supreme Court.

This decision to charge both the McDonald’s franchise and the parent company with these violations overturns decades of precedent.  For half a century, the local franchise was considered the only employer. The NLRB defined employers as those who controlled workers’ “essential terms of employment,” namely hiring, wage rates, firing, and job description. The franchises were the employers, not the owner of the franchise....

The NLRB’s decision is indeed cataclysmic for America’s system of franchise business.  If the parent company is considered a joint employer, and sets terms of hiring, then the value of a franchise business is reduced. People with complaints can sue McDonald’s USA, not just their local franchise. A single employer franchise may not be worth suing.  But if the franchisor is a joint employer, such as McDonald’s USA, with a value of $100 billion, then every local franchise is worth suing.

The NLRB is changing the definition of an employer to make it easier for unions to organize fast food workplaces. On June 26, Griffin stated in an amicus brief in another case, Browning-Ferris, that “the Board should abandon its existing joint-employer standard because it undermines the fundamental policy of the Act to encourage stable and meaningful collective bargaining.”  He believes that the NLRB’s new standard will promote collective bargaining and unionization.

Unions such as the Service Employees International Union, who organized strikes at fast food establishments earlier this month demanding a $15 hourly wage, want McDonald’s USA to sign agreements saying that the company will not fight unionization measures at its restaurants. Companies would agree to recognize the union if a certain number of authorization cards are collected, rather than holding a secret ballot election.

The SEIU wants to organize McDonald’s and other fast food chains because of the high rate of turnover in the fast food industry.  With turnover at McDonald’s around 157 percent annually, then in one year an average of three people fill every position. If the position is unionized, that adds up to three sets of initiation fees, generally around $50 each to $100 each, or $300 a year, on top of union dues that total 2 percent of paychecks. According to my calculations, unions stand to gain about $155 million each year from unionizing half of McDonald's workforce, $45 million of that from initiation fees alone.

Such potential revenues are important to the SEIU because membership has declined since 2011. It now stands at 1.9 million, the same level as 2009. SEIU membership has slipped by 3 percent since 2011, even though the labor force has grown 2 percent over the same time.

Franchisors sign 10- or 20-year contracts with franchisees, and the joint employer designation has the potential to overturn millions of these contracts.  With its designation, the NLRB is potentially upending agreements that have years to run. Systematic disruption of these contracts would be unparalleled.

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