The Franchise Memorandum

The National Labor Relations Board (NLRB) has vacated a decision by an administrative law judge (ALJ) denying the settlement agreements that had been proposed to resolve complaints against McDonald’s USA LLC, McDonald’s Restaurants of Illinois, Inc., and 29 McDonald’s franchisees alleging various unfair labor practices violations. McDonald’s USA LLC, 368 NLRB No. 134 (2019). The NLRB’s decision upheld the parties’ settlement agreements even though they do not impose joint employer liability on the franchisor as had been sought in the complaints.

The highly publicized complaints, filed in 2012, claimed that McDonald’s and the franchisees had threatened, interrogated, and surveilled employees, and unlawfully suspended and discharged employees in retaliation against those employees’ involvement in the Fight for $15 campaign by fast food workers for higher wages. According to the complaints, McDonald’s was liable as a joint employer of those employees due to its control over the franchisees’ labor relations policies. After many months of trial, the NLRB General Counsel, McDonald’s and the franchisees entered into settlement agreements that provided for various remedies, including back pay, restoration of hours and other working conditions, rescission of alleged unlawful rules, expungement of discipline and discharges, notice provisions, and a settlement fund for victims of future complaints, among others.

The ALJ denied a motion to approve the settlement agreements, in part because they were concluded just as the long trial was ending and because they did not acknowledge that McDonald’s was a joint employer with its franchisees. The NLRB disagreed and concluded that the settlement agreements were reasonable, that they provide a full remedy to all affected employees, and that accepting the settlement agreements would serve the policies underlying the Act as well as the Board’s longstanding policy of encouraging the amicable resolution of disputes. The NLRB remanded with instructions to approve the settlements. The decision does not ultimately determine whether or under what conditions a franchisor could or could not be a joint employer with its franchisees.

In the wake of the NLRB’s decision, lawyers for the Fight for $15 movement have asked the NLRB to reconsider the case, claiming that one of the members of the majority (William Emanuel) should have recused himself because his former law firm (but not Emanuel) had advised McDonald’s about dealing with the Fight for $15. Emanuel had been disqualified earlier from participating in the determination of the Hy-Brand case by the NLRB’s Inspector General, which lead to the Hy-Brand decision being withdrawn, resulting in the resurrection of the Browning-Ferris joint employment standard.