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Co-Employer Doctrine Being Tested In Franchisor Context

The National Labor Relations Board (NLRB) has issued complaints against McDonald’s franchisees and their franchisor, McDonald’s USA, LLC, as joint employers.  The complaints allege that McDonald’s USA, LLC and certain franchisees violated the rights of employees working at McDonald’s restaurants at various locations around the country by, among other things, making statements and taking actions against them for engaging in activities aimed at improving their wages and working conditions, including participating in nationwide fast food worker protests about their terms and conditions of employment.

On the heels of this announcement, a group of former McDonald’s workers are now suing their stores for discrimination and sexual harassment. What makes the case standout is that they are also suing the franchisor (i.e., not just the local franchisees where they worked). One of the main issues is control—just how much does McDonalds control its franchisees operations. Is a franchisor and its franchisee joint employers?  Can a franchisor be sued for wrongful termination when it did not actually employ the worker?

It is expected that there will be a number of wrongful termination lawsuits that are filed that define the scope of a joint employer. The NLRB’s findings and the lawsuits pending in court will make a significant difference on future employment law and litigation. For example, from time to time, a franchisee fails and does not pay its employees wages due or its wrongfully terminates the employee.   By allowing a franchisor as a target, expanding the scope of a joint employer will help afford workers with a remedy.  For example, if the franchisee goes out of business, the franchisor may provide a “deep pocket” as a target. It also will likely assure that franchisors put more pressure on their franchisees to assure that they are properly following employment laws. Franchisors, on the other hand, will end up wrapped into many lawsuits which will increase their operating costs.   As the NLRB and the courts wrestle with these issues, it will be interesting to see the outcome of the NLRB’s claims and the litigation predicated upon it.

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