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What does the McDonald’s ruling mean for the franchise industry?

| Dec 22, 2019 | Franchise Law |

Franchisees are the unsung small business owners of America. The franchisor may set standards for brand preservation and policy, but the franchisor’s role in day-to-day operations is arguably small. The unclear nature of the relationship between the franchisor and franchisee has resulted in countless lawsuits, especially since the proposal of an updated joint-employer rule.

The National Labor Relations Board (NLRB) proposes a new standard in joint-employer relationships, which would define the joint-employer status of franchisor/franchisee operations once and for all. The proposed rule would have a significant impact on the franchising industry. If this rule comes into effect, the franchisor and franchisee relationship would legally remain separate unless the situation meets specific terms. Franchisees would be legally responsible for their business, with limited grounds to pass responsibility to the franchisor.

The McDonald’s matter

After five years of legal proceedings, the National Labor Relations Board issued its decision on the McDonald’s joint-employer lawsuit. In a landmark decision, they found that McDonald’s and its franchisees are not operating under a joint-employer relationship.

One factor in this outcome was that McDonald’s plays no part in personnel matters (hiring and firing) and, therefore, cannot be liable for the actions of its franchisees. Had the ruling differed, it could have forced McDonald’s to bargain with franchise workers across the nation who formed unions to protest and lobby for better pay and conditions.

The McDonald’s ruling could indicate which way the NLRB is leaning regarding the proposed joint-employer rule, on which it has yet to issue a final decision. Time will tell.

What could the proposed joint-employer rule mean for you?

Your business is your business. Your actions are yours alone, and you will be responsible and liable for them. This proposed rule could mean more freedom for franchisees in day-to-day choices as well as legal independence—for better and worse. The NLRB will likely issue its final decision on the proposed joint-employer rule soon.

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