Nowhere perhaps did the ruling reverberate louder than in Atlanta, headquarters for Arby’s, Chick-fil-A, Popeye’s and other fast-food franchises, as well as many hotel, retail and temp agency chains.
“The restaurant industry is deeply concerned about this. It totally changes the nature of the franchisee-franchisor relationship,” said Karen Bremer, executive director of the Georgia Restaurant Association. “It could have a significant effect on, gosh, wages, taxes, workman’s comp rates, insurance, you name it.”
Bremer said the association will challenge the ruling in court. And it’s unlikely the local McDonald’s or Hooters will go union anytime soon. Still, the ruling, as well as the movement to raise the minimum wage, troubles the franchise and contracting industries.
The ruling stemmed from dozens of complaints by the Fast Food Workers Committee, financed by the SEIU, against McDonald’s Corp. claiming retaliation by the world’s largest burger chain against workers who tried to unionize their restaurants.
NLRB General Counsel Richard Griffin last week found that 43 of the complaints had merit and he would consider McDonald’s a “joint employer” and, thereby, party to any anti-organizing activity by its franchisees. McDonald’s has long claimed that the franchises are, in essence, independent contractors and, therefore, it is not responsible for their actions.
If the decision is upheld on appeal, the Illinois-based corporation could be considered the employer of all who work at the 14,000 restaurants and be held accountable for employee conditions, including salary, hours and safety. Unions could now target corporate McDonald’s and the hundreds of thousands of workers it employs.
The crux of the dispute revolves around how much control, input or oversight McDonald’s wields over the restaurants. The fast-food industry has mostly operated under a franchisor-franchisee relationship whereby individual store owners are responsible for a restaurant’s daily operations and pay royalties to the corporate parent, which issues management guidelines.
“Obviously, they exercise a tremendous amount of control over the details on how food is prepared, what the signage should look like and things like that,” said Richard Hurd, an economist and labor expert at Cornell University. “While they have not had the same kind of contractual agreement that says you must pay a wage of $8 an hour, they certainly have the ability to hold (franchisees) accountable for that. McDonald’s is in position to influence the terms and conditions of employment.”
Hurd and others argue that the burger giant, with $28 billion in revenue last year, dictates management policies while washing its hand of labor and wage issues.
McDonald’s says its 3,000 franchise owners operate independently receiving only brand protection, management expertise, food quality and customer service instructions. The company also claims no role in hiring, firing, wages or hours.
“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,” Heather Smedstad, the corporation’s human resources director, said in a statement.
Bremer says restaurant association members are contacting congressmen and following the legal lead of industry organizations. Krystal, Zaxby’s, Popeyes, Arby’s, Wing Zone and other Atlanta-based chains declined comment or didn’t returns calls from the Atlanta Journal-Constitution.
Restaurants aren’t the only industry concerned.
“The impact would not only (apply) to franchising, but anybody who uses independent contractors,” said Perry McGuire, a former corporate attorney for Chick-fil-A who’s now at Smith, Gambrell & Russell in Atlanta. “This is just a very early launching point (for the Obama administration) to reach into every industry that might use independent contractors and pull them into the employment realm. It would just have a chilling impact on people being able to chase their dreams of owning their own business.”
Shone Frasier has a dream too. He’d like to be paid more than $7.25 an hour. Frasier, 23, worked four years at a McDonald’s in Charleston, S.C. before moving to Atlanta a few months back. After taxes, Frasier said he was lucky to bring home $400 every two weeks.
“After you pay your rent, the light bill, the fuel bill, you’re left with nothing,” Frasier said before the recent protest outside McDonald’s. He hopes the ruling will help lead one way or another to higher wages.
As Frasier led the protestors who chanted (“Hey, hey, ho, ho, McDonald’s greed has got to go”) and waved signs, truckers along Fulton Industrial honked horns in solidarity. A Fulton County police officer even added a burst of his patrol car’s siren.
The McDonald’s manager declined comment, and the outlet’s owner didn’t respond to an interview request. McDonald’s Corp’s. CEO, though, suggested recently that his company could support raising the nation’s minimum wage to $10.10 an hour, as espoused by President Obama and other Democrats.
Frasier said $10.10 would be “good,” but $15 would be “awesome.”