U.S. Markets close in 6 hrs 13 mins

McDonald's labor ruling could shake-up franchise model

Hot Stock Minute
McDonald's labor ruling could shake-up franchise model

McDonald’s (MCD) is facing a new battle on the labor front that could shake-up the franchise model. The National Labor Relations Board ruled that McDonald's is a "joint employer" along with its franchises, and could be held liable in lawsuits filed by employees. The suits allege unfair labor practices including forcing employees to work off-the-clock and not paying overtime.

McDonald’s has 14,000 restaurants in the U.S., most of which are owned by franchisees.

“This decision to allow unfair labor practice complaints to allege that McDonald’s is a joint employer with its franchisees is wrong. McDonald’s will contest this allegation in the appropriate forum,” Heather Smedstad, senior vice president of human resources at McDonald’s USA, said in a statement. "McDonald's also believes that this decision changes the rules for thousands of small businesses, and goes against decades of established law regarding the franchise model in the United States."

The International Franchise Association, which represents franchisees, also opposed the NLRB ruling. "Millions of jobs and the livelihoods of hundreds of thousands of independent franchise small businesses are now at risk due to the radical and unprecedented nature of this decision," said Steve Caldeira, president and CEO of the International Franchise Association said in a statement. "Ruling that franchises are joint-employers will be a devastating blow to franchise businesses and the franchise model."

Meanwhile, labor groups and the fast food movement applauded the ruling, describing it as a huge victory. Santoli believes the NLRB decision does bring corporate headquarters a little bit closer to the ground zero of the dispute, but he doesn’t think it’s a game changer for the minimum wage debate. However, Santoli calls it a “win” for workers and the unions because it gives them a little more leverage.

If upheld, the decision could disrupt the franchise model, and some believe it could pave the way for the fast-food industry to unionize. Santoli doesn't agree. “I don’t necessarily think that this going to be that big driver of mass unionization," he said. Santoli also points out that another issue that works against unions is that most people who work at fast-food chains don’t see themselves there long term. 

“The unions want them to think that way. I don’t think it’s really there in the rank and file,” he says.

We want to know what you think. Should fast-food employees be able to unionize? Vote in our poll, or leave a comment below or on Twitter.

CORRECTION: An earlier version of this story said that most of McDonald's U.S. franchises are owned by the company. Most of the U.S. franchises are owned by franchisees.