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McDonald’s ruled co-employer with its franchisees

On Behalf of | Oct 20, 2014 | Commercial Litigation |

New Jersey franchise owners may be interested in a recent decision by the National Labor Relations Board, which ruled that McDonald’s is a co-employer with its franchisees. While the ruling is currently limited to McDonald’s, the precedent may pave the way for other franchisers to be considered joint employers and potentially liable for the actions of its franchisees with regard to employee disputes.

Specifically, the NLRB made the decision in response to recent protests by franchise employees. The ruling unlocks the possibility that McDonald’s may be held liable for deficiencies in franchise disputes, that might involve issues like withheld wages, sexual harassment and workers’ compensation complaints.

For protection, a business may wish to review the language of their operations manual to ensure that it is not interpreted as maintaining direct control over the franchise or its employees. Removing the parent company from being overly involved in the franchise, particularly when training new employees, may require another way to ensure quality control and adherence to company standards. One way to do this is to install cameras to check that employees up to regulation. Another way might be to employ secret shoppers to visit franchises to determine if appropriate training is taking place.

Companies may wish to emphasize training managers and franchisees to ensure that they are capable of adequately training their employees to uphold company standards. Competency tests administered to prospective employees with questions on areas such as appearance of the store, customer service and other issues pertinent to company image may also be helpful.

When structuring a business, it may be advisable to consult with an attorney well versed in business and commercial law to avoid future problems. An attorney’s advice may be beneficial if business disputes arise.

Source: The Huffington Post, “Protect Your Franchise from the Same Fate as McDonald’s“, Bob Steinberger, October 15, 2014