McDonald’s at $ 13 an hour for skirts Joint employer liability risk

McDonald’s Corp. Promise to raise wages at company-owned establishments fails to set higher wages for the vast majority of its U.S. locations, a move that helps the fast food giant avoid sharing liability with franchisees for labor and employment violations.

McDonald’s announced Thursday that it would increase wages to an average of $ 13 an hour at 650 restaurants, following similar action by Chipotle Mexican Grill Inc. earlier this week. They joined major retailers including Amazon.com Inc., Target Corp., and Costco Wholesale Corp., raising wages and hiring amid a labor shortage strained by a pandemic across the country, as well as pushing nationwide for a minimum wage of $ 15 at levels national and state.

However, approximately 14,000 restaurants owned by franchisees for McDonald’s will not fall under the wage increase requirement. This could help protect the company from private lawsuits and government enforcement actions alleging it is jointly responsible for salary and professional claims filed against independent institutions, lawyers and academics have said.

“They’ve probably been careful because of the issue of joint employers demanding pay increases at company-owned stores,” said Jeff Hirsch, a law professor at the University of North Carolina, who focuses on work and employment. “Wages are at the heart of working conditions. A mandate from McDonald’s that workers should be paid a certain amount would be weighty in favor of their accountability. ”

The liability of “joint employers” was an important and controversial issue during Obama’s day, and one that the Biden administration is already resuscitating. The United States Department of Labor and other agencies could go through legal tests that would make it more difficult for the franchise industry and others to avoid it.

“The big picture is that there is always a problem with a franchise and franchisor agreement,” said Travis Gemoets, lawyer at Jeffer Mangels Butler & Mitchell LLP, who represents employers. “This is the third rail. The franchisor must take all kinds of measures not to overstep the limits or have an argument that they have substantial control over the worker. “

The McDonald’s company did not immediately respond to a request for comment.

“Franchisees make their own salary and benefit decisions based on local market conditions that work for their community, and they often offer wages and benefits equal to or greater than those of larger companies,” Matt Haller, senior vice president of government relations and public affairs for the International Franchise Association, said in a statement. “McDonald’s Corporation cannot set the rate of pay for its franchised restaurants any more than it does for the Pizza Huts or Starbucks down the street.”

Franchise locations

McDonald’s has fought fierce battles in recent years to avoid liability in union and wage disputes at franchise establishments.

The test for joint liability varies between federal and state laws, but all assess the type of control a company has over the conditions of employment of workers.

“For a franchise, maintaining control is important to their brand, and they have a legitimate interest in that,” Hirsch said. “From that point of view, they would like to control everything, but then you run into a liability issue.”

He said companies that encourage independent sites to raise wages could also find themselves in a gray area if the Biden administration sees joint employer liability under a test of indirect control, as the Obama administration did. .

Gemoets said that once a brand started dictating pay rates for each location, it would cross the line and force companies to face charges of discrimination, unpaid wages and union management.

In anticipation of the Biden administration’s action, he recommends that customers be extra on guard in case a new standard comes into place.

“My advice to these companies would be broad and specific,” he said. “Even if you say it’s a brand standard to have competitive salaries, you are toasting. The touchstone is always the question of control. “

Government position

Federal government position on joint responsibility for employment is returning to its leadership under the former president Barack obama, when several labor agencies have adopted general interpretations of when several companies share responsibility for working conditions.

The Biden administration has not mandated a new joint employment policy, but is in the process of revoking Trump’s Labor Department approach. And Biden’s main salary regulator, Jessica Looman, has affirmed the importance of eliminating joint liability as part of her agency’s law enforcement actions.

During Obama’s day, the government’s focus on shared corporate responsibility sparked an aggressive lobbying campaign in the franchise industry seeking to curb what they saw as a crusade on their model of business. business. Corporate lobbyists found a more receptive audience when Trump took office.

Trump’s Labor Department withdrew Obama-era guidelines that called for expanded joint employment responsibility under the Fair Labor Standards Act, which governs minimum wages and overtime, and has issued its own regulation which restricted the circumstances in which companies could be held jointly liable.

But a federal judge overturned the most important parts of the regulation last September, about six months after it came into force. The Trump administration appealed the decision in November, and a coalition of business groups intervened in the case to try to convince a federal appeals judge to restore the standard favorable to employers.

Nonetheless, the Biden administration could make the dispute moot by completing a March proposal to withdraw the common Trump employment measure. DOL’s Wages and Hours Division is currently reviewing public comments on this proposed withdrawal, which they will use to inform a final rule repealing it.

Push for a salary of $ 15

Meanwhile, union efforts to push McDonald’s to raise wages across the country continue. Workers’ activists in the Fight for $ 15 movement say their demands are not going to change and that the recent wage increase indicates a greater need for action.

“Obviously, McDonald’s understands that in order to hire and retain talented workers, something has to change,” Doneshia Babbitt, a $ 15 union leader, said in a statement. “They tried to offer $ 500 signing bonuses to new hires and they even tried handing out McChicken sandwiches in exchange for a job interview. Now they are raising the wages of some of us and using sophisticated math tricks to ignore the fact that they are selling most of us short. ”

The group said it plans to strike in 15 cities on May 19, the day before McDonald’s annual shareholders meeting, to demand $ 15 for each worker in each restaurant.

The issue of joint employers is a question of ideology and the system is in favor of the employer whether or not he is forced to negotiate with the workers, said Anne Lofaso, professor of labor law at West Virginia University.

She said if the company wants control, it will have to be ready to negotiate with the workers. “It’s simple,” she said. “Our law is moderate and Biden, at most, will bring more moderation.”

Courts do not have to listen to Ministry of Labor guidelines, and anything the administration does cannot go beyond legal precedent on how to interpret joint employer liability.

“Politicians will want to tell you that the sky is falling for business,” she said. “We have the courts, which will uphold the rule of law.”

Gemoets said it was clear there was a competitive push to raise wages, and actions by the big chains could signal the start of a wider groundswell.

“There are quite a few unemployed people, and we thrive on competition, and competition is king,” he said. “Corporate America realizes that it must step up its efforts to fill its ranks.”

– With the help of Ben Penn


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