The National Labor Relations Board is investigating whether employees at McDonald’s Corp. (MCD:US) restaurants were fired for joining labor unions, a case that threatens to disrupt the decades-old fast-food franchise model.
A worker group accused McDonald’s locations in New York of terminating nine employees for their union involvement and organizing activities, according to documents obtained by Bloomberg News through a Freedom of Information Act request. Charges were filed by the Fast Food Workers Committee for incidents occurring from November 2012 until April this year.
By including the parent company in the case, the workers are targeting the restaurant owners and McDonald’s as a joint employer. If the labor board decides against the company, it could set a precedent for franchised restaurants, putting more responsibility on parent corporations. That could raise costs for restaurant chains, as well as deter entrepreneurs from getting into franchise businesses, said Steve Caldeira, president of the International Franchise Association.
“Thousands of small business owners would lose control of the operations and the equity they worked so hard to build,” said Caldeira, who expects a decision in the case soon. “Equally troubling would be the millions of jobs that would be placed in jeopardy.”
Terri Hickey, a spokeswoman for Oak Brook, Illinois-based McDonald’s, said the matter is pending.
“It is both inappropriate and premature for us to comment,” she said in an e-mail.
The workers also alleged that McDonald’s restaurants suspended employees, cut their hours and threatened them with termination for union activities. The incidents took place at locations in Manhattan, Brooklyn and the Bronx, according to the charges.
The U.S. fast-food industry is largely franchised, meaning independent businesspeople own and operate the restaurants. They pay a percentage of their sales to the parent company, which manages the brand and image. McDonald’s U.S. locations are about 90 percent franchised, and the parent says it has a hands-off approach to how employees are managed. If the NLRB holds McDonald’s accountable as a joint employer, the company may have to police its franchisees more closely to prevent future infractions.
Catherine Ruckelshaus, general counsel of the National Employment Law Project, a worker advocacy group, said McDonald’s has more sway over how franchised stores treat employees than it says.
“McDonald’s claims that it has no influence over the wages and working conditions of its employees, but it effectively controls workers’ pay, hours and schedules by controlling every other variable in the business except wages,” she said in an e-mailed statement. “Technological advances allow McDonald’s to watch over its franchisees’ operations like a hawk, in ways that go well beyond simply protecting its brand. A decision in this case should leave no doubt that McDonald’s is an employer and put an end to its self-serving charade that it is not.”
McDonald’s is under increasing pressure to raise wages amid national protests and strikes. On May 21, the day before McDonald’s annual meeting, fast-food workers protested at the company’s headquarters. McDonald’s told most of its 3,200 headquarters employees to stay home to avoid the demonstration and heavy traffic.
Other fast-food companies, such as Yum! Brands Inc. (YUM:US) and Wendy’s Co. (WEN:US), also are facing criticism for not paying workers enough. Since November 2012 -- when fast-food employees picketed in New York, seeking wages of $15 an hour and the right to form a union -- protests and strikes have spread across the country. In May, some restaurant employees protested overseas.
More than 3 million workers prepare and serve food in the U.S., and they make $9.08 an hour on average, according to government data.
If the labor board finds McDonald’s jointly liable as an employer of the restaurant workers, parent companies would have to add employees to monitor hiring, firing and discipline decisions, said Andy Puzder, chief executive officer of CKE, the owner of fast-food chains Hardee’s and Carl’s Jr.
“We’ll be in restaurants more and we’ll have to hire staff,” said Puzder, whose company franchises about three-quarters of its locations. “We’re going to have to charge for that.”
Fast-food restaurants are a “low-margin business,” he said. “When you mess with the controllable expenses at the franchise level, you are really endangering the model.”
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