The National Labor Relations Board issues a ruling on July 29, 2014 that held that McDonald’s Corp. could be subject to liability, along with its individual franchises, for any wage and labor violations.
Rulings like this emphasize the need to have franchise agreements and other contracts carefully reviewed.
In the United States alone, McDonald’s has more than 14,000 restaurants. About 90 percent of those restaurants are owned by franchisees. This is significant because previously any lawsuits filed against McDonald’s restaurants for wage and labor violations would be filed against the individual restaurant. Because McDonald’s Corp. didn’t directly own the restaurant, they would not have been joined as a Defendant.
This ruling potentially changes the landscape for franchisors. McDonald’s can now be held liable and joined as a Defendant in such labor and wage cases. This exposes them to much more potential liability. It also eases the way for larger nationwide lawsuits, and opens the door for unionization of McDonald’s employees across the country.
McDonald’s provides intense training for its franchisees, and requires them to attend their university upon purchasing the franchise. The NLRB cited this control as one reason to include McDonald’s Corp. as jointly liable. McDonald’s orders its franchisees to strictly follow its rules on food, cleanliness, and most notably, employment practices.
Other franchises around the country are watching the outcome of this closely, as McDonald’s has indicated that it will contest the NLRB’s decision.