McDonald's has been under potential legal doom since January 2016. It was the result of a Department of Labor reaction to a National Labor Relations Board finding a couple of years before. And now, under the Trump administration, the clouds have parted, meaning good news, at least for the central company. Franchise owners, however, may find themselves left out in the cold.
The Department of Labor had issued Administrator's Interpretation No. 2016-1 (since removed from the DoL site) that discussed how the agency would consider joint employment. This is the condition when workers effectively have more than one employer.
In the case of McDonald's, the issue was brought up earlier when the NLRB said the company was effectively a joint employer of people working for its franchisees because of the control the central company exerted over operations. Essentially, some workers, backed by union help, had filed suit alleging the company had illegally withheld wages in a number of ways.
Normally, such lawsuits would focus on the immediately employer. But workers and unions pushed for the joint employment interpretation so they could create class action suits that would reach into the pocket of McDonald's itself and force various types of change throughout all U.S. franchises.
This morning, the Department of Labor walked back this interpretation and some previous guidance from 2015:
U.S. Secretary of Labor Alexander Acosta today announced the withdrawal of the U.S. Department of Labor's 2015 and 2016 informal guidance on joint employment and independent contractors. Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department's long-standing regulations and case law. The department will continue to fully and fairly enforce all laws within its jurisdiction, including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.
As labor lawyer Alex Passantino of the firm Seyfarth Shaw wrote in a blog post today, "The withdrawal likely indicates a changing focus in the Department's enforcement efforts away from the 'fissured' industry initiative of the Obama Administration."
The "fissured" language refers to certain industries such as construction, hotels, and restaurants in which companies may indirectly employ people, whether through a claimed independent contractor status, through a third-party labor employer, or via business partners like franchise owners.
The DoL decision doesn't suddenly invalidate anything that the NLRB has already approved. Lawsuits can continue. But the important news for McDonald's is that, under the Trump administration, it can expect a reduction of attention to -- if not an all-out dismissal of -- fissure industries and the potential for facing the results of potential labor law infractions of the business partners.
So, you won't hear the cheering that you might had the suits been dismissed. But there must have been a collective sigh of relief in the board room, at among management teams at other franchisors.
Although, franchisees may be less happy. If attention doesn't turn to the wealthy central companies, small business owners will find themselves without direct allies or help when faced with labor lawsuits. They owners will have to pony up for lawyers and, if they lose, restitution.
There are also significant implications for other industries, especially those using a gig-economy model in which workers are hired through online platforms. That is good news for many companies that have used the gig worker providers to undertake tasks without having to add to their permanent payroll.