Tag: NLRB

Amazon Settlement with NLRB a Reminder for Employers — “Confidential” Wage Policies Violate the NLRA

Barnes Thornburg

Last week in a settlement with the NLRB, online retailer Amazon agreed to allow its largely non-union workforce to discuss pay and working conditions with each other without fear of discipline. The settlement, as reported by Bloomberg News which obtained a copy, required Amazon to rescind certain work rules that prohibited workers from sharing information with one another, although Amazon did not admit any violation of the NLRA.

Amazon’s work rule was considered too broad by the NLRB because it prohibited discussion of wages and working conditions, considered quintessential “protected concerted activity” under the NLRA. In Amazon’s case, the NLRB got involved when an employee was disciplined after voicing concerns about security in the employee parking lot. The employee apparently filed a charge with the NLRB protesting his discipline and this led the NLRB to examine not only the circumstances of the employee’s discipline, but to scrutinize Amazon’s policies as well.

This settlement serves as a reminder to all employers, both union and non-union, that policies which prohibit discussion of terms and conditions of employment are on their face unlawful under the NLRA.  It is tempting for employers to require that wages or other benefits be kept “confidential” for a variety of reasons, but enforcing such policies is an easy way to draw unwanted attention from the NLRB, especially given the Board’s current focus on protected concerted activity.

ARTICLE BY

Christine Holst
OF
Barnes & Thornburg LLP

NLRB Shows Some Restraint in its Protection of Employee Social Media Communications: Employee Termination Arising From “Egregious” and “Insubordinate” Facebook Posts Was Legal Under the NLRA

Mintz Levin Law Firm

In the wake of the NLRB’s aggressive crackdown on social media policies, many employers have asked: “Is there any limit to what employees can post on social media about their employers?”  It appears that there is.  Just last week, a former employee of the Richmond District Neighborhood Teen Center in San Francisco learned this the hard way when the Board dismissed his complaint that the Center violated Section 8(a)(1) of the National Labor Relations Act after it pulled a rehire offer after it discovered that he particpated in an inappropriate Facebook exchange.

During the 2011-2012 school year, Ian Callaghan and Kenya Moore both worked for the Center’s afterschool program—Callaghan as a teen activity leader and Moore as the teen center program leader.  In May 2012, the Center held a staff meeting during which it solicited and received both positive and negative feedback from its staff, including Callaghan and Moore.  In July 2012, Callaghan and Moore received letters inviting them to return to the Center for the 2012-2013 school year; this time both as activity leaders.

The following month, Callaghan and Moore communicated over Facebook about (i) refusing to obtain permission before organizing youth activities (“ordering sh*t, having crazy events at the Beacon all the time.  I don’t want to ask permission…”; “Let’s do some cool sh*t and let them figure out the money”; “field trips all the time to wherever the f#@! we want!”), (ii) disregarding specific school district rules (“play music loud”; “teach the kids how to graffiti up the walls…”), (iii) undermining leadership (“we’ll take advantage”), (iv) neglecting their duties (“I ain’t go[]never be there”), and (v) jeopardizing the safety of participating youth and the program overall (“they start loosn kids I aint helpin”; “Let’s f#@! it up”).  When the Center’s administration became aware of the postings, it revoked the offers to rehire, and Callaghan filed a charge with the Board.

Under Section 7 of the Act, employees have the right to engage in concerted activities for their mutual aid and protection, including complaining to one another about the terms and conditions of their employment.  In that vein, an employer may not take adverse action against employees for exercising their Section 7 rights without violating Section 8(a)(1) of the Act.  That said, employees can take it too far and lose the protection of Section 7 when their conduct is particularly egregious or of such a character as to render the employees unfit for further service.

Here, although Callaghan and Moore previously had engaged in protected activity during the May 2012 staff meeting when they offered negative feedback about the Center, and although neither Callaghan nor Moore had ever engaged in any acts of insubordination, the Board held that they lost the Act’s protection because “[t]he magnitude and detail of insubordinate acts advocated in the [Facebook] posts reasonably gave [the Center] concern that Callaghan and Moore would act on their plans, a risk a reasonable employer would refuse to take.”

Several years ago, the Richmond District Neighborhood Center decision may have been a foregone conclusion.  But in light of the current Board’s aggressive approach to Section 7 protections, the decision provides employers with reassurance that Section 7 has retained at least some outer bounds.  The decision provides some guidance for defining “insubordination” in social media policies, for example, to include communications pervaded by detailed plans to jeopardize the employer’s very existence, violate legally enforceable employer policies, or neglect job duties.

For a full discussion of the Board’s recent approach to social media policies, see George Patterson’s September 3, 2014 posting “NLRB Continues Aggressive Crackdown on Social Media Polices.”

ARTICLE BY

Erin Cornell Horton
OF
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

NLRB Finds Facebook Posts Go Too Far for the Act's Protection

Neal Gerber

As we reported previously, social media issues are troublesome for employers who must navigate unsettled or even conflicting federal and state laws and decisions.  A recent ruling from the National Labor Relations Board (NLRB) demonstrates that employers can still protect their business against inappropriate online activity by employees.  Specifically, the NLRB ruled that an Employer acted lawfully in rescinding two employees’ rehire offers, finding that the Facebook conversations between the two were so egregious as to lose protection under the National Labor Relations Act and render the two individuals unfit for further service with the Employer.

The Employer operates a Teen Center that provides afterschool activities to students.  During a period between school sessions, just before the employees would have been rehired for the coming school year, the two individuals engaged in a series of Facebook conversations during which they repeatedly talked, in profane terms, about what they intended to do when they returned to work. The messages contained numerous indications that the two would refuse to follow the rules and policies of the Employer, would refuse to work with management or get required permissions, would engage in various acts to undermine the school’s leadership, and they detailed specific acts of intended insubordination.

The NLRB agreed that the exchange of messages (which certainly discussed their displeasure over working conditions) was “protected concerted activity” under the Act. Normally, such protected activity cannot be the basis of any adverse employment action. However, the Board determined that the conduct constituted “pervasive advocacy of insubordination which, on an objective basis, was so egregious as to lose the Act’s protection.”

In finding the conduct unprotected, the Board relied on the fact that the individuals repeatedly described a wide variety of planned insubordinations in specific detail. According to the Board, these acts were beyond brief comments that might be explained away as a joke or hyperbole divorced from any likelihood of implementation. Rather, the Board concluded that the magnitude and detail of insubordinate conduct advocated in the posts reasonably gave the Employer concern that the two individuals would act on their plans, a risk that a reasonable employer would refuse to take by returning the individuals to the workforce. The Board concluded that the Employer was not required to wait for the employees to follow through on the misconduct they advocated.

This decision gives employers some relief that there are limits to what employees can say on social media, even if the subject of their conversations or postings is “protected” and “concerted”. However, before an employer can take adverse employment action against an employee who engages in such activity, the employer must be able to demonstrate that, on an objective basis, the activity is egregious and pervasive and is of such magnitude and of such detail that it is reasonably likely to be acted upon rather than being mere hyperbole.

[Richmond District Neighborhood Center, 361 NLRB No. 74 — October 28, 2014]

ARTICLE BY

Howard L. Bernstein
OF
Neal, Gerber & Eisenberg LLP

The Unions Are Coming…The Unions Are Coming! We Don’t Need Paul Revere’s Lantern To See Who’s Coming!

Michael Best Logo

On December 16, 2014, the term of NLRB Board Member Nancy Schiffer ends.  This is a critical date for the union movement because on that date the pro-Union members of the Board will lose their 3-2 majority status and their effective control over the NLRB. So what’s coming next for private employers?

On July 29, 2014, the General Counsel of the NLRB issued an advice memorandum to the NLRB Regional Directors identifying his game plan regarding re-establishing a new definition for joint employer, to make it easier for unions to organize:

“The new broader standard will allow employees to use traditional economic weapons to exert lawful economic pressure on those parties to realistically control the economics of their relationship even if they do not directly control working conditions.”

Prior to that public announcement, the General Counsel had stated that the objective of the Board has been to consistently uphold unions organizing very small subsets of employees, called “micro-units,” instead of the traditional wall-to-wall bargaining units.  Quite simply, these “micro units” are easier for unions to gerrymander and, ultimately, to organize.

The final step in this trifecta is the most troubling for employers – the new NLRB Election Rules.  Through rule-making, the NLRB is seeking to re-write the NLRA in such a way as to greatly speed up the elections.  The new rules reduce the timeline for elections from over 35 days to under 20 days between the time of the petition and the election.  These “quickie” or “ambush” elections will undoubtedly benefit unions, because it gives the employer less time to explain to the employee the pros and cons of joining a union.  These rules are on a fast track and clearly support the union movement.

So, undoubtedly, the unions are indeed coming after management!  This is a watershed moment for the unions.  The union’s financial coffers have been depleted as the union membership numbers continue to plummet. If they don’t get their act together and start to effectively unionize, then they will have to stop blaming employers and/or the NLRB for their organizing failures.

Under the new NLRB Election Rules, nearly all election-related issues will be resolved after the election.  This process would be similar to the approach taken in the recent Northwestern University football players’ case, in which the NLRB held the election and then impounded the ballots.  The NLRB will sort out any issues after the fact so long as the objections don’t impact more than 20% of the bargaining units.

Employers had better gear up and get ready because the unions are locked and loaded and ready to attack. The stage has been proactively set by the NLRB to give unions their best-ever opportunity to succeed in union organizing. If employers don’t prepare now, they will jeopardize their freedom to deal directly with their employees and reduce their flexibility in running their company. The NLRB Regional Offices are already gearing up to explain the new changes in NLRB election procedure, starting in November, so here come the unions!

© MICHAEL BEST & FRIEDRICH LLP
ARTICLE BY

Amy O. Bruchs
Carlos R. Pastrana-Torres
Robert W. Mulcahy
Farrah N.W. Rifelj
Brian P. Paul
OF
Michael Best & Friedrich LLP

NLRB Says There Is Such Thing as a Free Lunch

Barnes Thornburg
This week, the National Labor Relations Board (the NLRB) attempted to disprove the old adage that there’s no such thing as a free lunch. In Gates & Sons Barbeque of Missouri, Inc., decided on September 16, 2014, the three-member panel of the NLRB unanimously affirmed most of the decision reached by an administrative law judge (the ALJ) that a Kansas City barbecue restaurant chain violated employee rights by taking away the meal benefits previously afforded to its employees.

Checkered Tablecloth with Fork and Knife

The free lunch at issue in this case consisted of a meat sandwich and a side provided to each employee during each shift that he or she worked, a $6 to $10 value. This lunch benefit was provided to employees at the Main Stree location (the only location, out of eight total locations, at issue) from at least 2011 until the end of July 2013.  Other benefits received by employees during this time included the right to make purchases on a “tab,” to be deducted from future paychecks, and qualification for monthly bonuses tied to the location’s performance.

In July 2013, some of the employees of the Main Street location took part in a campaign, organized by the Workers’ Organizing Committee of Kansas City (the WOC), to obtain higher wages for food workers. Prior to the planned 1-day strike organized by the WOC, the Main Street location manager met with a group of employees that had previously met with a WOC organizer and made various threats intended to stop them from striking. In spite of the threats, nine out of the thirty Main Street employees participated in the 1-day strike. The workers that struck were all allowed to return to work, but the Main Street location supervisors announced the following week, via posted notices and word of mouth, that they were discontinuing certain employee benefits, incluing the free employee meals and the right to buy food on a tab.

Despite the testimony of one of the Main Street location’s supervisors that the free lunch was taken away from the workers because of customer complaints and poor performance, the ALJ found that the taking away of the free lunch and other benefits was a violation of Section 8(a)(1) of the National Labor Relations Act because it was in retaliation for the employees’ participation in the 1-day strike. Gates & Sons was ordered to make their employees whole for the lost meal benefit.

ARTICLE BY

Steve L. Hernández
OF
Barnes & Thornburg LLP
© 2014 BARNES & THORNBURG LLP

Micro Bargaining Units Coming To a Workplace Near You

Steptoe Johnson PLLC Law Firm

It is no secret that many employers take steps to try and keep their workplaces union-free.  One of the newer concerns for employers in that camp is the possibility that employees could form a “micro bargaining unit,” which is a unit of employees that make up only a small portion of the workforce. 

Act Now! to Preserve Your Collective Bargaining Rights!

In a 2011 case, Specialty Healthcare, the National Labor Relations Board (NLRB) established a new standard for determining appropriate bargaining units.  Specifically, the Board stated that, in evaluating a potential unit, it would focus on the community of interest among the petitioning employees.  According to the Board in that case, factors such as the extent of common supervision, interchange of employees, and geographic considerations should all be taken into account when evaluating a proposed unit.

Specialty Healthcare also placed a significant burden on employers trying to challenge smaller units.  The Board stated that, if an employer wished to argue that a unit should include additional employees, the employer needs to show that employees in a larger unit have an “overwhelming” community of interest with those in the proposed smaller unit.  That’s a higher burden than what has been applicable in the past, and not one easy to meet.

The effects of Specialty Healthcare were evident in a more recent Board decision.  In Macy’s Inc., the Board recently confirmed that 41 Macy’s cosmetic and fragrance department sales employees could form a bargaining unit.  Those 41 employees made up about one-third of the employees at that Macy’s store.  Macy’s argued that this unit was inappropriate because cosmetic and fragrance employees shared an overwhelming community of interest with the other sales employees, but the Board saw it differently.

The Board noted several factors that established the community of interest among the cosmetic and fragrance employees: they all worked in the same department, were supervised by the same manager, had limited contact with other sales employees, and were paid on the same commission-based based structure.  Additionally, the Board pointed out that Macy’s rarely transferred employees between the cosmetic and fragrance department and other store departments.

While the Macy’s, Inc. case was not a positive development for employers, the NLRB then rejected a proposed micro-unit about a week later in a different case at Bergdorf-Goodman, a Nieman Marcus subsidiary.  In that case, the Board found that salon shoes salespeople and contemporary shoe salespeople lacked a community of interest.  In so deciding, the Board noted that the proposed unit in that case was not created based on any administrative or operational lines established by the employer.  Additionally, the employees had different department managers, different floor managers, and different directors of sales.

While both of these cases dealt with the retail industry, the results are important to employers in any sector, since the Specialty Healthcare standard certainly can be applied to create micro-bargaining units in other industries.  In fact, employers can probably expect unions to try organizing smaller bargaining units within larger companies, particularly where efforts to organize larger groups have proved unsuccessful.  This strategy allows unions to select pro-union employee groups and increase their likelihood of winning an election.

If there’s one proactive takeaway from these cases, it’s that employers need to think in advance about how they can make themselves less vulnerable to micro-unit organizing.  For example, cross-training employees and having them work in different departments makes it less likely a union could demonstrate a community of interest among a small group of employees.  Of course, any steps taken to combat against micro-unit organizing also need to be evaluated for their operational feasibility.  In most cases, it’s probably best that employers contact experienced legal counsel to weigh the pros and cons involved.

Firings for Facebook Comments Unlawful, NLRB Rules

Jackson Lewis Law firm

An employer violated the National Labor Relations Act by discharging two employees because of their participation in a Facebook discussion about their employer’s State income tax withholding mistakes, by threatening employees with discharge for their Facebook activity, by questioning employees about that activity, and by informing employees they were being discharged because of their Facebook activity, the NLRB has ruled. The Board also ruled the employer’s Internet/Blogging policy violated the NLRA. Triple Play Sports Bar and Grille, 361 NLRB No. 31 (2014).

Facebook Posts

Triple Play employees Jillian Sanzone and Victor Spinella discovered they owed more in State income taxes on their earnings at the sports bar than expected. Sanzone discussed this at work with other employees, and some employees complained to the employer about the tax problem. The employees did not belong to a union. 

Sanzone, Spinella, and former employee Jamie LaFrance had Facebook accounts. On January 31, 2011, LaFrance posted the following “status update” to her Facebook page:

Maybe someone should do the owners of Triple Play a favor and buy it from them. They can’t even do the tax paperwork correctly!!! Now I OWE money…[expletive deleted]!!!!

The following comments were posted to LaFrance’s page in response:

KEN DESANTIS (a Facebook “friend” of LaFrance’s and a customer): “You owe them money…that’s [expletive deleted] up.”

DANIELLE MARIE PARENT (Triple Play employee): “I [expletive deleted] OWE MONEY TOO!”

LAFRANCE: “The state. Not Triple Play. I would never give that place a penny of my money. Ralph [DelBuono] [expletive deleted] up the paperwork…as per usual.”

DESANTIS: “yeah I really dont go to that place anymore.”

LAFRANCE: “It’s all Ralph’s fault. He didn’t do the paperwork right. I’m calling the labor board to look into it bc he still owes me about 2000 in paychecks.”

At this point, Spinella selected the “Like” option under LaFrance’s initial status update. The discussion continued:

LAFRANCE: “We shouldn’t have to pay it. It’s every employee there that its happening to.”

DESANTIS: “you better get that money…thats [expletive deleted] if that is the case im sure he did it to other people too.” 

PARENT: “Let me know what the board say because I owe $323 and ive never owed.”

LAFRANCE: “I’m already getting my 2000 after writing to the labor board and them investigating but now I find out he [expletive deleted] up my taxes and I owe the state a bunch. Grrr.”

PARENT: “I mentioned it to him and he said that we should want to owe.”

LAFRANCE: “Hahahaha he’s such a shady little man. He prolly pocketed it all from all our paychecks. I’ve never owed a penny in my life till I worked for him. Thank goodness I got outta there.”

SANZONE: “I owe too. Such an [expletive deleted].”

PARENT: “yeah me neither, i told him we will be discussing it at the meeting.”

SARAH BAUMBACH (Triple Play employee): “I have never had to owe money at any jobs…i hope i wont have to at TP…probably will have to seeing as everyone else does!”

LAFRANCE: “Well discuss good bc I won’t be there to hear it. And let me know what his excuse is ;).”

JONATHAN FEELEY (a Facebook “friend” of LaFrance’s and customer): “And ther way to expensive.” 

Sanzone and Spinella Discharged

When Ralph DelBuono, the employer’s co-owner, learned about the Facebook discussion, he discharged Sanzone, telling her it was because of her Facebook comment. Spinella was terminated the next day, after being interrogated about the Facebook discussion, the meaning of his “Like” selection, the identity of the others in the conversation, and other issues. The other co-owner told Spinella that, because Spinella “liked” the disparaging and derogatory comments, Spinella was disloyal and it was “apparent” that Spinella wanted to work elsewhere. He told Spinella, “[Y]ou will be hearing from our lawyers.” Thereafter, the company’s attorney contacted Sanzone by letter, suggesting a possible defamation action. The lawyer also contacted LaFrance who, in response, deleted the entire Facebook conversation and posted a retraction. 

Sanzone and Spinella filed separate unfair labor practice charges against Triple Play, which the NLRB consolidated into one complaint. 

The employer did not dispute the employees’ Facebook activity was concerted and they had a protected right to engage in a Facebook discussion about the employer’s tax withholding calculations. The employer, however, contended it had not violated the NLRA because the plaintiffs had adopted LaFrance’s allegedly defamatory and disparaging comments, which were unprotected. The employer also asserted the Facebook posts were unprotected because they were made in a “public” forum, accessible to employees and customers, and they had undermined the co-owner’s authority in the workplace and adversely affected its public image.

Comments Protected

The Board disagreed. It determined the employees did not lose the Act’s protection to engage in concerted activity because of their comments in the Facebook discussion. Under its holding in Atlantic Steel, 245 NLRB 814 (1979), the NLRB explained, it must balance employee rights with the employer’s interest in maintaining order at its workplace, but Atlantic Steel dealt with workplace confrontations with the employer, which was not the scenario here. The employer’s reliance on that decision was therefore misplaced. In this case, the Board pointed out, the disputed conduct involved a social media discussion among offsite, off-dutyemployees, and two non-employees in which no manager or supervisor participated and where there was no direct confrontation with management. Further, the Board said, Sanzone’s “use of a single expletive” to describe her manager “in the course of a protected discussion on a social media website” did not “sufficiently implicate” the employer’s “legitimate interest in maintaining discipline and order in the workplace.”

The Board also rejected the employer’s argument that Sanzone’s comment was unprotected because it was a workplace confrontation that could be seen by customers DeSantis and Feeley. The NLRB noted they joined the discussion as LaFrance’s Facebook friends, on their own initiative and in the context of a social relationship with LaFrance outside of the workplace, not because they were the employer’s customers, and“[t]his off-duty indiscretion away from the [employer’s] premises did not disrupt any customer’s visit to the [employer].”

Neither did the Board see this conduct as disloyal or defamatory. While the Board agreed an employer has a legitimate interest in preventing the disparagement of its products or services and in protecting its reputation from defamation, against which NLRA Section 7 rights are to be balanced, that interest was not pr
esent here so as to overcome the employees’ statutory protection. It rejected the employer’s contention that Sanzone’s comment and Spinella’s “like” were disloyal and unprotected. The purpose of the employees’ communications was to seek and provide mutual support to encourage the employer to address problems in the terms or conditions of employment, not to disparage its product or services or to undermine its reputation, the NLRB said. The discussion clearly showed a labor dispute existed and the employees’ participation was not directed to the general public (they were more comparable to conversations that can be overheard by a customer). Further, the Board said the comments were not “so disloyal . . . as to lose the Act’s protection” because they did not even mention the employer’s products.

The Board also rejected the contention that the employees’ comments were unprotected because they were defamatory. According to the agency, Triple Play had not met its burden to establish the comments were made with knowledge of their falsity or with reckless disregard for their truth or falsity. In addition, it said that Sanzone’s use of an expletive to describe a co-owner in connection with the asserted tax-withholding errors “cannot reasonably be read as a statement of fact; rather, Sanzone was merely (profanely) voicing a negative personal opinion of [the co-owner].”

“Like” Protected

The Board also decided that Spinella’s use of Facebook’s “like” option was protected. It expressed agreement only with the comment it immediately followed (LaFrance’s original post), the Board found, not with LaFrance’s other comments. Accordingly, said the Board, Spinella’s activity was protected by the Act, and the employer’s adverse action was unlawful. (See our blog post, Employee’s Facebook ‘Like’ is Part of Concerted Activity: NLRB.)

Internet/Blogging Policy Unlawful

The Board faulted the employer’s internet/blogging policy, as well. It found that, since employees would reasonably construe the employer’s “Internet/Blogging” policy to prohibit the type of protected Facebook post that led to the unlawful discharges, it was illegal.

The policy stated:

The Company supports the free exchange of information and supports camaraderie among its employees. However, when internet blogging, chat room discussions, email, text message, or other forms of communication extend to employees revealing confidential and proprietary information about the company, or engaging in inappropriate discussions about the company, management, and/or co-workers, the employee may be violating the law and is subject to disciplinary action, up to and including termination of employment. Please keep in mind that if you communicate regarding any aspect of the Company, you must include a disclaimer that the views you share are yours, and not necessarily the views of the Company. In the event state or federal law precludes this policy, then it is of no force or effect.

Employees could reasonably interpret the policy as proscribing discussions about terms and conditions deemed “inappropriate” by the employer, because “‘inappropriate’ [is] ‘sufficiently imprecise’ that employees would reasonably understand it to encompass ‘discussions and interactions protected by Section 7,’” the Board found.

Employer Cautions

This decision is wide-ranging. It underscores the need for employers to pause, reflect, and thoroughly investigate before taking action against employees for alleged misconduct where they have acted together in regard to their wages, hours or working conditions, even where their language might give offense to the employer despite the fact that members of the public can view their complaints. The decision also shows the NLRB affords significant leeway to employees, even permitting public invective against business owners — at least up to a point. Finally, employers should avoid policies and rules that contain broad, imprecise, or vague prohibitions that might be viewed as restricting unlawfully employees’ protected activity. 

ARTICLE BY

Howard M. Bloom
Philip B. Rosen
 
OF
Jackson Lewis P.C.

“Do You Want Liability With That?” The NLRB McDonald’s Decision that could undermine the Franchise Business Model (Part II)

 

McBrayer NEW logo 1-10-13

 

Yesterday’s post discussed the decision of NLRB’s General Counsel to hold McDonald’s Corp. jointly responsible with its franchise owners for workers’ labor complaints. The decision, if allowed to stand, could shake up the decades-old fast-food franchise system, but it does not stop there. The joint employer doctrine can be applied not only to fast food franchises and franchise arrangements in other industries, but also to other employment arrangements, such as subcontracting or outsourcing.

This decision could also impact the pricing of goods and services, as franchisors would likely need to up costs to offset the new potential liability. Everything from taxes to Affordable Care Act requirements could be affected if the decision stands.

If you are a franchisor and are currently in what could be determined to be a joint employer relationship, consider taking steps to further separate and distinguish your role from that of your franchisee. While franchisors should always take reasonable measures to ensure that franchisees are in compliance with applicable federal and state employment laws, they should take care to not wield such force over them to give the appearance of a joint-employer relationship.

We will be following the NLRB decision and keep you updated as the issue progresses.

ARTICLE BY

Luke A. Wingfield
 
OF 
McBrayer, McGinnis, Leslie and Kirkland, PLLC

“Do You Want Liability With That?” The NLRB McDonald’s Decision that could undermine the Franchise Business Model

McBrayer NEW logo 1-10-13

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.

ARTICLE BY

Luke A. Wingfield
 
OF 
McBrayer, McGinnis, Leslie and Kirkland, PLLC

“Do You Want Liability With That?” The NLRB McDonald’s Decision that could undermine the Franchise Business Model

McBrayer NEW logo 1-10-13

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.

ARTICLE BY

Luke A. Wingfield
 
OF 
McBrayer, McGinnis, Leslie and Kirkland, PLLC