“Do You Want Liability With That?” The NLRB McDonald’s Decision that could undermine the Franchise Business Model
On July 29, 2014 the National Labor Relations Board (“NLRB”) General Counsel authorized NLRB Regional Directors to name McDonald’s Corp. as a joint employer in several complaints regarding worker rights at franchise-owned restaurants. Joint employer liability means that the non-employer (McDonald’s Corp.) can be held responsible for labor violations to the same extent as the worker’s “W-2” employer.
In the U.S., the overwhelming majority of the 14,000 McDonald’s restaurants are owned and operated by franchisees (as is the case with most other fast-food chains). The franchise model is predicated on the assumption that the franchisee is an independent contractor – not an employee of the franchisor. Generally, the franchisor owns a system for operating a business and agrees to license a bundle of intellectual property to the franchisee so long as on the franchisee adheres to prescribed operating standards and pays franchise fees. Franchisees have the freedom to make personnel decisions and control their operating costs.
Many third parties and pro-union advocates have long sought to hold franchisors responsible for the acts or omissions of franchisees – arguing that franchisors maintain strict control on day-to-day operations and regulate almost all aspects of a franchisee’s operations, from employee training to store design. Their argument is that the franchise model allows the corporations to control the parts of the business it cares about at its franchises, while escaping liability for labor and wage violations.
The NLRB has investigated 181 cases of unlawful labor practices at McDonald’s franchise restaurants since 2012. The NLRB has found sufficient merit in at least 43 cases. Heather Smedstad, senior vice president of human resources for McDonald’s USA, called the NLRB’s decision a “radical departure” and something that “should be a concern to businessmen and women across the country.” Indeed it is, but it is important to note that General Counsel’s decision is not the same as a binding NLRB ruling and that it will be a long time before this issue is resolved, as McDonald’s Corp. will no doubt appeal any rulings.
Similar to the growing U.S. interest in exploring civilian uses of unmanned aircraft systems (“UAS”), efforts are underway across the African continent to deploy UAS in innovative ways such as protecting wildlife, expanding internet connectivity to isolated communities, and delivering humanitarian aid. In Kenya, Dickens Olewe and his African SkyCAM project is helping journalists to revolutionize their news reporting and coverage.
The winner of the inaugural African News Innovation Challenge, African SkyCAM “establishes Africa’s first newsroom-based ‘eye in the sky’ drones and camera-equipped balloons to help media that cannot afford news helicopters cover breaking news in dangerous situations or difficult-to-reach locations.” It has the potential to address two of the main shortcomings faced by traditional news media in the region. First, journalists who lack financial and technological resources to conduct remote reporting often are “‘risking life and equipment’” to get their story. Second, by not resorting to state-owned UAS, journalists are able to maintain editorial independence in their reporting.
Use of UAS for journalism and other civilian purposes in the region is facing the same regulatory challenges which are delaying their widespread deployment in the U.S. Although the Kenyan government has not yet established a regulatory framework for civilian UAS, it has indefinitely grounded both the Flying Donkey Challenge (a high-profile, Swiss-funded competition to develop flying robots which are capable of carrying heavy cargo over long distances) and the Ol Pejeta Conservancy’s wildlife surveillance drone. Similarly, earlier this year, the South African Civil Aviation Authority announced a “clampdown” on civilian UAS, a warning that some observers believe has chilled this nascent industry. However, it is promising that the South African government has stated that it is “cognizant of the urgent need and demand for UAS usage” and that it will be releasing an interim guidance document by March 31st of next year. In addition, South Africa and other countries in the International Civil Aviation Organisation Unmanned Aircraft Systems Study Group are continuing to work to develop a safe and harmonised regulatory framework.
In the meantime, African SkyCAM (which is looking to expand to Mozambique and Namibia) and others will need to pay careful attention to finding the proper balance between business, compliance, and innovation.