Welcome to McDonald’s Can I Take Your Order?

by Brian Idehen

The golden arches of the McDonald’s logo have been an American staple since the first location opened in Illinois in 1955.[1] Now a global entity,[2] a traveler is able to pick up McDonald’s food in over 100 countries.[3] With great power however, comes great responsibility. McDonald’s expansion has been of great financial benefit, with the company registering just outside of the top 100 on the Forbes 500 list.[4] This ranking helps garner the company social notoriety, business cache, and, of course inevitable litigation. McDonald’s, like most companies, has found itself in a large amount of litigation, however one lawsuit in particular may have a drastic impact on the company.

In July of 2014, the National Labor Relations Board (NLRB) determined that McDonald’s is a joint employer.[5] Black’s Law defines joint employment as “a job in which the essential terms and conditions of the employee’s work are controlled by two or more entities.”[6] This ruling affects McDonald’s because the NLRB is ruling that McDonald’s controls, and would therefore be responsible for the actions of, their employees at all locations, including franchises.[7] This ruling is not consistent with McDonald’s private franchise agreements that did not create a “master-servant” relationship.[8] A master-servant relationship is one where “a principal who employs an agent to perform service in his affairs and who controls or has the right to control the physical conduct of the other in the performance of the service.”[9]

McDonald’s and other companies would want to contest that there is a master-servant relationship between the company and its franchises. The NLRB disagreed however, feeling that McDonald’s has control over its franchises.[10] McDonald’s should not like this result because over 80% of its locations worldwide are franchised.[11] The number of franchises McDonald’s has might explain why it has found itself in a large number of litigations since the July NLRB ruling. In the last six months, McDonald’s has had sixty-seven cases adjudicated by the NLRB, and currently there are 161 open NLRB cases where McDonald’s is a named party.[12] McDonald’s locations in open litigation since December of 2014 include restaurants in Detroit, St. Louis, New York City, Philadelphia, New Orleans, San Francisco, Los Angeles, Chicago, Phoenix, Minneapolis, and Indianapolis.[13] Since February of this year, six more franchises have been brought into litigation.[14] If McDonald’s is tasked with being responsible for the actions of their franchises, litigation could become burdensome and expensive very quickly. In addition, McDonald’s may have to change its business model altogether. If four out of every five locations can possibly bring the company into litigation, there is no doubt McDonald’s will want to create some sort of buffer between itself and its franchises.

McDonald’s has a vested interest in seeing that the NLRB decision is overturned. Until then, the company will have to deal with the NLRB’s ruling that they are joint employers in the United States. Globally, however, McDonald’s can rely on the fact that other countries have not yet (and may not ever) view their franchisor-franchisee relationship in the same manner as the NLRB. This will allow the company to at least continue to open and maintain locations under the same model internationally, retaining their reputation as one of the global leaders of fast food.

[1]McDonald’s Museums, McDonald’s, http://www.aboutmcdonalds.com/mcd/our_company/mcdonalds_history_timeline/museums.html (last visited March 2, 2015).

[2] McDonald’s Missions & Corporate Values, McDonald’s, http://www.aboutmcdonalds.com/mcd/our_company/mission_and_values.html (last visited March 2, 2015).

[3] McDonald’s — The Leading Global Food Service Retailer, McDonald’s, http://www.aboutmcdonalds.com/mcd/our_company/mcdonalds_history_timeline/museums.html (last visited March 2, 2015).

[4] Fortune 500 2014, Fortune, http://fortune.com/fortune500/mcdonalds-corporation-106/ (last visited March 2, 2015).

[5] Office of Public Affairs, NLRB Office of the General Counsel Authorizes Complaints Against McDonald’s Franchises and Determines McDonald’s USA, LLC, is a Joint Employer, National Labor Relations Board (July 29, 2014), http://www.nlrb.gov/news-outreach/news-story/nlrb-office-general-counsel-authorizes-complaints-against-mcdonalds.

[6] Black’s Law Dictionary 604 (9th ed. 2011) (explaining joint employment with the example of a company who hires a contractor, then takes over control of the contractors employees).

[7] See Melanie Trottman & Julie Jargon, NLRB Names McDonalds as ‘Joint- Employer’ at Its Franchisees, The Wall Street Journal (Dec. 19, 2014, 6:14 PM), http://www.wsj.com/articles/nlrb-names-mcdonalds-as-joint-employer-of-workers-at-its-franchisees-1419018664.

[8] See Herbert B. Chermside, Jr., Annotation, Vicarious Liability of Private Franchisor, 81 A.L.R. 3d 764 (1977).

[9] Restatement (Second) of Agency § 2 (1958).

[10] Trottman & Jargon, supra note 7.

[11] Franchising, McDonald’s, http://www.aboutmcdonalds.com/mcd/franchising.html (last visited March 2, 2015).

[12] Organizations of Interest, National Labor Relations Board, http://www.nlrb.gov/cases-decisions/organizations-interest?organization=MCDONALD%27S (last visited March 2, 2015).

[13] McDonald’s Fact Sheet, National Labor Relations Board, http://www.nlrb.gov/news-outreach/fact-sheets/mcdonalds-fact-sheet (last visited March 2, 2015).

[14] Id.

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