People don’t kill people. Computer programs that monitor labor hours do…
…or something like that…
This piece of news caught my attention:
The general counsel of the National Labor Relations Board ruled on Tuesday that McDonald’s could be held jointly liable for labor and wage violations by its franchise operators — a decision that, if upheld, would disrupt longtime practices in the fast-food industry and ease the way for unionizing nationwide.
Business groups called the decision outrageous. Some legal experts described it as a far-reaching move that could signal the labor board’s willingness to hold many other companies to the same standard of “joint employer,” making businesses that use subcontractors or temp agencies at least partly liable in cases of overtime, wage or union-organizing violations.
I’d appreciate thoughts and feedback on this from anyone with an understanding of labor law. At a high level, the ruling puzzles me if only because of my understanding of the relationship between the franchise and the individual franchisees. If the franchisees independently operate the restaurants subject to the requirements established by the franchise, how is the franchise itself responsible?
Via The New York Times:
In 1982, a federal appeals court, echoing the labor board at the time, said that a company was to be considered a joint employer in situations where two or more employers exerted “significant control” over the same employees. In the years since, the board has adopted a narrower standard, holding that a company could be deemed a joint employer only when it directly controlled, for instance, a franchisee’s or a temp agency’s employment practices.
With the decision on Tuesday, Mr. Griffin appears to be embracing the earlier “significant control” standard.
In the current cases, the fast-food workers, backed by the Service Employees International Union, said that McDonald’s had significant control over its franchisees’ employment practices, noting that it supplies many with software telling them how many employees to use at any given hour. The workers pointed to an instance in which McDonald’s even told a franchise owner that it was paying its employees too much. The average fast-food wage is about $8.90 an hour.
More on the software issue from Think Progress:
The justification for targeting McDonald’s corporate is based on a computer system the company installs in its stores to monitor labor costs. “Managers at McDonald’s look at something they call the ‘labor number’ on the computer throughout the day,” said Jason Hughes, who has worked at a McDonald’s location in Fremont, CA, for the past two years. “The labor number is how much the store spends on workers versus how much money the store brings in, and I often hear managers worry that ‘labor is too high,’” Hughes said on a call with reporters Thursday afternoon.
“I knew I wouldn’t be making a lot of money,” said Hughes, “but I thought that a well-known company like McDonald’s would treat me fairly, or at least follow the law. We brought this lawsuit because neither of those things happened.”
The use of the “labor number” monitoring computers is crucial to these class-action suits’ effort to hold the corporate center of McDonald’s accountable for wage law violations at its stores. According to attorneys who explained the suits to reporters, those computer systems are installed in franchise and corporate-owned McDonald’s locations alike, and they are systematically used to keep workers in unpaid limbo, which violates federal wage and hour laws. “When that labor cost reaches a certain percentage,” Michigan attorney Ed James said, “the franchisees take people off the clock to get it down below that number, then get people to clock back in.” There are about 1,500 workers in Michigan who will be eligible to join the two suits there should it be granted class-action status, according to James.
Still, absent any evidence that the corporate parent directs franchisees to act in a certain fashion (i haven’t seen it but that doesn’t mean it doesn’t exist), I fail to see how any of this satisfies the “significant control” standard. Would we be having this conversation if the labor monitoring software was provided by a third-party software vendor?
To the extent wage theft has occurred, the franchisees should be held liable and forced to pay every penny they owe. However, we all know there’s a bigger issue here.