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FAST FOOD DEMONSTRATIONS RESULT IN EFFORTS TO FIND LIABILITY ON FRANCHISORS AND OTHER ALLEGED JOINT EMPLOYERS

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In recent years there has been a campaign among fast food workers, particularly those employed by McDonald's franchisees, to demand "$15.00 and a union" and the results are leading to changes in the legal environment. Demonstrations were held in as many as 150 cities across the U.S. in September, and in some cases the fast food workers walked off their jobs. It is difficult for fast food workers at McDonald's to organize a union since there are more than 3,000 different franchisees, but in a recent NLRB complaint, the Board indicated it will name McDonald's as a joint respondent in certain cases in which employees of franchisees contend they were retaliated against because of their protected activities. In bringing this complaint, the NLRB apparently intends to re-evaluate the traditional standard for deciding when a contractual business arrangement can cause one employer to be a "joint employer" of the workers directly employed by another. The "joint employer doctrine" has most often been employed in situations involving subcontracting and temporary-employment agencies. It has rarely been employed in franchising situations, although analogous principles are utilized by the NLRB where a claimant attempts to hold a parent company responsible for employment law violations committed by a subsidiary. The NLRB apparently intends to argue that franchisees "often function as little more than capital investors without meaningful control over their restaurants' business plans or the most essential terms and conditions of their workers' employment." One union, the Service Employees International Union, is reportedly investing some $15 million into the fast food campaign to unionize fast food workers. The union attempts to characterize its actions as an economic justice movement to provide livable wages comparable to the civil rights movement. The union further argues that the franchisor is a joint employer on the grounds that it orders its franchise owners to strictly follow its rules on food, cleanliness, and employment practices, as well as use menus, supplies, uniforms, and training materials supplied by the franchisor. There have been similar efforts by immigrant owners of franchised office cleaning companies to contend that they are actually employees of the franchisors, because the franchisors control every aspect of their jobs, from the uniforms and badges to wear to the clients they receive. A few class or collective actions are pending on wage-hour issues pertaining to such janitorial personnel, with the plaintiffs contending that they were never truly franchise owners at all, but rather employees.

The significance of these cases goes beyond the franchisor/franchisee relationship, as nationally, businesses are increasingly turning to contract workers. For example, staffing and other temporary employment companies employ an average of over 3 million contract workers a week. Further, these concepts could be extended to other subcontracting arrangements by contending that the employees of the subcontractors are actually jointly employed by the primary contractor. The NLRB and various plaintiff and civil rights groups want to attack the traditional concept that one business cannot be held liable for the employment-related claims of another, unless they have direct control over the employees in question. The construction industry may at some point be attacked since subcontracting practices are quite common there.

Various employer groups contend the attacks could interfere with efficiencies resulting from freedom of contracting. Further, a couple of recent legal rulings appear to favor employers on the issue. In Orozco v. Plackis, 757 F.3d 445 (7/3/14), the Fifth Circuit Court of Appeals ruled that a franchisor was entitled to judgment as a matter of law after a jury found that it was an "employer" under the wage-hour laws of the franchisee's employees. Similarly, the California Supreme Court ruled 4-3 in a recent state law claim against Domino's Pizza that the franchisor was not liable for the sexual harassment claims by employees of one of the chain's franchised locations. Patterson v. Domino's Pizza, LLC, No. S204543 (California Supreme Court, 8/28/14). In the latter case, the California Supreme Court stated that the decision was not intended to shield franchisors from liability under all circumstances: "A franchisor will be liable if it has retained or assumed the right of general control over the relevant day-to-day operations at its franchised locations. . . ."

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