A workers' group has recently filed charges against McDonald's, alleging that various McDonald's locations in New York City terminated employees due to their union involvement and organizing activities. Bloomberg reports that nine employees were allegedly terminated between November 2012 and April of this year in Manhattan, Brooklyn, and the Bronx. Charges were filed by the Fast Food Workers Committee on behalf of the workers.

Why should you care about this McDonald's lawsuit? Well, it could force major changes in the franchise world -- not just in the fast food industry. The Fast Food Workers Committee is not just targeting the individual franchise owners.

Rather, the organization is targeting the restaurant owners and McDonald's as a joint employer. This is highly unusual, as typically employment issues are the sole responsibility of franchisees. This is because, in part, that while franchisors focus instead on brand standards, training, and advertisement, it is franchisees that hire and fire employees as well as determine pay rates, benefits, and schedules.

If the labor board decides against the company, it could set a potentially dangerous precedent for franchised restaurants, putting more responsibility on parent corporations. Steve Caldeira, president of the International Franchise Association, argued that that could raise costs for restaurant chains, as well as deter entrepreneurs from getting into franchise businesses. "Thousands of small business owners would lose control of the operations and the equity they worked so hard to build," Caldeira explained. "Equally troubling would be the millions of jobs that would be placed in jeopardy."

The bottom line is that if the National Labor Relations Board (NLRB) sees McDonald's as a joint employer, the consequences could disrupt the current model of franchising. "Entrepreneurs are drawn to franchising because it is a proven, time-tested business model," Caldeira said. "But if control is taken away from these small business risk takers who invest their own financial resources, fewer new businesses of this kind will be started."

It is no secret that the role of franchisors and franchisees has been a hot topic of debate this year, particularly in relation to employee wages. While companies such as McDonald's insist that it is franchisees' responsibilities to control workers' wages, minimum wage activists have criticized chains for low wages and CEOs for their multimillion-dollar salaries. Many contend that large franchises, such as McDonald's, hold more sway over how franchised stores treat employees than they say.

"McDonald's claims that it has no influence over the wages and working conditions of its employees, but it effectively controls workers' pay, hours, and schedules by controlling every other variable in the business except wages," explained Catherine Ruckelshaus, general counsel of the National Employment Law Project, in an e-mailed statement.

"Technological advances allow McDonald's to watch over its franchisees' operations like a hawk, in ways that go well beyond simply protecting its brand. A decision in this case should leave no doubt that McDonald's is an employer and put an end to its self-serving charade that it is not."

It's unclear how the wage debate will play out and whether fast food franchises will boost the wages of their lowest-paid employees amid rising tension, increased union activity, and more protests.

One thing, however, is clear: If the NLRB finds McDonald's to be jointly liable as an employer of the restaurants' workers, the ruling would undoubtedly have far-reaching impacts across the industry.

Sources:

http://www.entrepreneur.com/article/235798

http://www.bloomberg.com/news/2014-07-17/workers-tell-nlrb-that-mcdonald-s-fired-them-for-union-activity.html

Article by Jason Duncan, CEO/Founder of ManagerComplete.com. ManagerComplete is an online software application that helps multi-unit franchises manage operations effectively.

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