The National Labor Relations Board (NLRB) ruled Tuesday that employees who work at McDonald's are employees who work for McDonald's. This is actually a big deal because it means that McDonald's' low-wage employees can start going after the larger company for issues like wage theft and ultimately could organize themselves into a union.
For decades the giant fast-food company McDonald's has been using a gimmick, pretending that its local outlets are independent "small businesses" and that the larger McDonald's company and brand has nothing to do with personnel and other policies of these outlets. This has allowed the company to remain above liability when the outlets steal the wages of employees, as well as making it much more difficult to form a union that negotiates with the larger chain.
The NLRB has now stated that McDonald's has substantial power over the working conditions of the people working in these local outlets, and has a great deal of influence over the business operations of its franchisees. This leaves individual franchise operators without much leeway over working conditions. Therefore, the NLRB considers the larger McDonald's to jointly be an employer of workers at these franchises for the purposes of NLRB rules.
Ruling Helps Unionization
Among other benefits for McDonald's employees, this ruling will help workers to organize a union. Until now, employees at each franchise were limited to organizing only the workers at the franchise. This made the long, hard and expensive process of forming a union nearly impossible because it would have to be repeated for each individual franchise. Now unions have a single target in the parent McDonald's corporation and can launch a unified organizing campaign.
From the Wall Street Journal report, "McDonald's Ruling Sets Ominous Tone for Franchisers":
"This decision will have huge implications," said Paul Millus, a labor attorney with Meyer, Suozzi, English & Klein P.C., who isn't involved in the McDonald's cases.
"It could make it possible for franchise workers to overcome the obstacle that the bargaining unit is limited to workers in single stores, making it much easier to unionize," he said.
The New York Times, in "McDonald’s Ruling Could Open Door for Unions," says this ruling gives workers more clout:
Wilma Liebman, a former chairwoman of the National Labor Relations Board under President Obama and now an occasional consultant to unions, said the decision could give fast-food workers and labor unions leverage to get the company to negotiate about steps that would make it easier to organize McDonald’s restaurants. Similarly, she said, the ruling could give the workers and unions more clout in pressing McDonald’s to have its franchisees raise wages.
Not Just McDonald's?
McDonald's is only one company using various gimmicks to pretend that it has no responsibility to its employees – or other stakeholders like customers and the government that provides education for their employees, roads, courts, military protection and so on. Other companies engage in various schemes, like using "contract employees," "temps," subcontractors who hire employees, or other gimmicks to make it appear they have no responsibility or liability for anything except raking in the dough.
The Times story explains:
And in an era when companies increasingly use subcontractors and temp agencies to free themselves of employment decisions and headaches, experts said the ruling could force the companies to be more accountable.
“Employers like McDonald’s seek to avoid recognizing the rights of their employees by claiming that they are not really their employer, despite exercising control over crucial aspects of the employment relationship,” said Julius Getman, a labor law professor at the University of Texas. “McDonald’s should no longer be able to hide behind its franchisees.”
In particular, businesses that operate under the franchise model will have to start following rules regarding treatment and pay of employees, and unions will be able to organize nationwide instead of individually. For example Dunkin’ Donuts, 7-Eleven stores, H&R Block tax preparers, dry cleaning chains and many others will now be understood as "joint employers."
Helping Workers "Stalls Growth"
In the Washington Post report, "Fast food workers score a big win against McDonald’s," a lobbyist with the National Retail Federation is quoted saying that this ruling will "stall growth":
“The last thing this economy needs is decisions like this which merely serve to stall job growth and diminish much-needed capital investment," said David French, the trade group's senior vice president of government relations. "When a government agency unilaterally decides to unravel the long-established and successful business relationships between franchisees and franchisers, the entire business community reacts. And the very people the NLRB was established to protect – American workers – may be the ultimate losers in this decision as those same businesses reconcile with an uncertain future.”
Right. Because job creators.
Companies That Are This And That
McDonald's' use of gimmicks to make it look as if it is not an employer when it needs to, while looking like a single unified and known brand when it needs to do that is an example of companies that say what they need to say when the need to say it, and say something else when they need to say something else.
The 2012 post, "Unraveling The Romney/Bain Tax Story," looked at how Mitt Romney's Bain Capital was set up partly as an American company and partly as a non-American company:
Why is part of the same company set up based in Delaware, and part in the Cayman Islands or Luxemburg or Bermuda? Because the functions of the American-based company are those functions that avoid taxes on foreign entities, and the functions of the Caymans-based part are the functions that would have to pay U.S. taxes if it was in the U.S. But in reality it is the same company — except for tax purposes!
... The American-based entities can buy American companies without incurring “foreign-based” obligations. Then the foreign-based entities can avoid the taxes that the American-based buyers of companies would have to pay. And the foreign-based investors can be in the foreign-based parts of the company, avoiding U.S. tax obligations. Also American entities like pension funds can avoid U.S. taxes they would otherwise have to pay.
To put it another way, the same company can pretend it is U.S.-based when that is what it needs to be, and foreign-based when that is what it needs to be.
Companies that say they're this but they're really that are not a new phenomenon – like how some say that are not American, but they are really American. Or when they need to say they are American but they really aren't.
Or whatever they need to say at a given time. Like saying that helping American workers "stalls growth." Whatever.