The National Labor Relations Board (“NLRB”) unfair labor practice hearing against McDonald’s, USA, LLC (“McDonald’s) and numerous franchisees opened in New York City on Monday March 30, 2015, before Administrative Law Judge (“ALJ”) Lauren Esposito. (“ALJ”), a former NLRB field attorney and union lawyer. Also this week, the Service Employees International Union (“SEIU”) announced that it was investing an additional Fifteen Million Dollars in the Fight For Fifteen campaign, which seeks to organize fast food workers nationwide and that a series of events would take place across the country on April 15th as part of that effort.
In the McDonald’s cases, under the terms of a Case Management Order issued by ALJ Esposito on March 3, 2015, the ULP hearings are scheduled to take place in three phases, with adjournments between each phase. The hearing which began this week in Manhattan will start with the closely watched claims by the Board’s General Counsel that McDonald’s and its franchisees are joint employers. The General Counsel will produce witnesses who will offer testimony and evidence on the nationwide joint employer issue and will continue with evidence of joint employer status and evidence on specific violations allegedly committed by the franchisees in New York and Philadelphia. The hearing will then move to Chicago and will conclude in Los Angeles with the presentation of evidence of joint employer status and evidence regarding specific violations alleged to have occurred in the Midwest and California, respectively.
As we previously reported, on December 19, 2014, the General Counsel of the NLRB issued 13 Consolidated Complaints in Regional Offices across the country charging that McDonald’s and franchisees are joint employers and seeking to hold McDonald’s liable for unfair labor practices allegedly committed by its franchisees. The NLRB’s press release broadly outlined the basis for its decision to issue the Complaints:
“Our investigation found that McDonald’s, USA, LLC, through its franchise relationship and its use of tools, resources and technology, engages in sufficient control over its franchisees' operations, beyond protection of the brand, to make it a putative joint employer with its franchisees, sharing liability for violations of our Act. This finding is further supported by McDonald's, USA, LLC’s nationwide response to franchise employee activities while participating in fast food worker protests to improve their wages and working conditions.”
As a result of the interest generated by these cases, the NLRB has created a separate webpage entitled “McDonald’s Fact Sheet” with links the Complaints and the docket of proceedings.
At recent public appearances, including at the section meeting of the American Bar Association’s Committee on Developments Under the National Labor Relations Act, General Counsel Griffin addressed the legal theories he relied upon in authorizing the issuance of the Complaints alleging joint-employer status. He noted that it was the General Counsel’s position that the facts (he did not say which ones) would support a finding of joint-employer status under the Board’s existing legal standards and were not dependent upon the Board adopting a new standard such as the one the General Counsel advocated in the amicus brief filed in the still pending Browning Ferris case in which the Board is considering adopting a new more lenient standard for determining whether a joint-employer relationship.
The General Counsel’s Consolidated Complaints each contain three identical bare bones allegations with respect to the claim that franchisor and franchisees are joint employers: -“(1) McDonald’s and its franchisees are parties to a franchise agreement, (2) McDonald’s possesses and/or exercised control over the labor relations policies of each franchisee, and (3) McDonald’s and the franchisees are joint employers.”
On January 5, 2015, the General Counsel transferred the cases from Regions 4, 13, 20, 25 and 31 to the Regional Director from Region 2. On January 6, 2015, the Director of Region 2 issued an Order Consolidating the Consolidated Complaints from Regions 2, 4, 13, 20, 25 and 31 with the already-consolidated cases from Region 2, and set the March 30, 2015 hearing date.
McDonald’s filed its Answer to the Consolidated Complaints and a “Motion for a Bill of Particulars or, the alternative, Motion to Strike Joint Employer Allegations and Dismiss the Complaint” alleging that the General Counsel’s consolidated complaint failed to provide it with sufficient notice of the basis for the joint employer status in violation of fundamental due process, the Administrative Procedure Act, and the Board’s own internal manuals and guidelines. The franchisees also filed similar answers. The General Counsel opposed McDonald’s Motion for a Bill of Particulars, arguing that the allegation of a franchising relationship between McDonald’s and the franchisees provides sufficient notice of the allegations. The ALJ denied McDonald’s motion. McDonald’s also filed a Request For Special Appeal with the NLRB seeking permission to file an appeal to reverse the ALJ’ Order denying its Motion for a Bill of Particulars. That too was denied.
McDonald’s also filed a “Motion To Sever” the Consolidated Complaints, to allow for separate hearings for the charges from the six regional offices that had been consolidated for trial in New York. While the Board’s Rules and Regulations give the General Counsel discretion to consolidate cases the General Counsel’s discretion is not unlimited. Where the cases involve different factual issues, different backgrounds and different complaints or legal theories, the Board has held that consolidation was not proper. McDonald’s argued in these cases that consolidation is improper because the cases consolidated in Region 2 involve 61 charges, and perhaps most importantly, 22 separate distinct and unrelated employers, as well as 181 unrelated allegations and 30 individual restaurants. McDonald’s urged the judge to sever the complaints so that each individual franchisee will have his or her case heard by a separate Administrative Law Judge in the region where the case arose.
McDonald’s requested oral argument on its Motion to Sever. On February 11, 2015, the ALJ held a telephone conference with McDonald’s and all of the franchisees and their separate attorneys to address McDonald’s motion as well as scheduling issues. Given the number of parties and significant issues involved, McDonald’s counsel requested that the teleconference be transcribed by a court reporter, which the ALJ denied. Not surprisingly, the ALJ denied McDonald’s Motion to Sever.
On March 3, 2015, the ALJ issued a Case Management Order which the General Counsel had requested. The Order provides that the issue of whether McDonald’s can be held liable as a joint-employer for the unfair labor practices of its franchisees will be heard before trying the merits of the underlying unfair labor practice allegation. The Order further requires McDonald’s to present its evidence on the joint employer status specific to a franchisee immediately after the General Counsel and the Charging Parties present their evidence specific to the franchisee which allows the General Counsel and Charging Party multiple opportunities to hear and respond to McDonald’s evidence before resting their cases. McDonald’s filed a Request for Special Appeal seeking to reverse the ALJ’s Order, arguing that its alleged status as a joint-employer is a remedial issue that should be tried only after the General Counsel has proven the merits of the underlying charges against the franchisees alleged to have committed unfair labor practices and arguing that the sequence of trial unfairly allows the General Counsel and Charging Party a preview of McDonald’s case before they rest their cases.
The pressure on McDonald’s by organized labor extends beyond the NLRB proceedings. This week the New York Times reported that the Service Employees International Union (“SEIU”) has pumped more than $15 million into the Fight for Fifteen movement which seeks to raise the wages at McDonald’s and other fast food restaurants and retailers to a minimum of $15 per hour and helped persuade the NLRB to go after McDonald’s on a joint-employer theory.
In addition to their NLRB claims, workers at McDonald’s restaurants in at least 19 cities have also filed workplace health and safety complaints with the Occupational Safety and Health Administration (“OSHA”), alleging that they had been injured and placed in danger on the job because of a lack of adequate training and protective equipment.
The SEIU has arranged for a coalition of European and American unions to accuse McDonald’s of improper tax practices. Moreover, Organizers for the Fight for Fifteen will hold rallies in New York, Chicago and Los Angeles on April 15, 2015 in which they expect upwards of 10,000 protestors.
The McDonald’s case along with a pending NLRB case involving Browning-Ferris, are significant high stakes litigation which have the potential to fundamentally alter the way employers conduct business with franchisees and third-party contractors. Last week, the U.S. Chamber of Commerce’s Workforce Freedom Initiative (WFI) issued a 40 page report, “Opportunity at Risk: A New Joint-Employer Standard and the Threat to Small Business.” The report highlights the administration’s ongoing effort to redefine the concept of “joint-employment” relationships, and how these efforts “threaten to disrupt major sectors of the economy such as franchising and subcontracting.” The report is essential reading for employers, attorneys and anyone else interested in what the impact would be on the economy and employer-employee relations if the legal standards for determining joint-employer status change in the way that the Board’s General Counsel and the SEIU and other unions are urging in the McDonald’s cases and elsewhere.
We will continue to monitor these case closely and keep you appraised of new developments.
- Senior Counsel
- Board of Directors / Member of the Firm