Trump appointee may give McDonald's a break in landmark labor case

Nationwide demonstrations for a $15 minimum wage
Nationwide demonstrations for a $15 minimum wage

The Trump administration is moving to undo the actions of former President Obama on almost every front, and now it's happening with breathtaking speed at an agency charged with protecting worker rights.

Starting last month, after a 3-2 majority of Republican appointees were confirmed, the National Labor Relations Board reversed four Obama-era decisions and one from the Bush years that bolstered protections for workers.

Trump's influence at the NLRB is also being wielded by the general counsel he appointed, Peter Robb, who was confirmed by the Senate in November.

Last week, Robb withdrew a July 2017 complaint charging manufacturing conglomerate Honeywell (HON) with illegally locking out 350 union members in New York and Indiana for nearly 10 months by preventing them from doing their jobs and replacing them with temps. As a result of the dismissal, the workers won't get any compensation for the ordeal. The complaint had been filed by Robb's predecessor, former union attorney and Obama appointee Richard Griffin.

Now, it appears Robb may also back off what has become one of the most expensive and staff intensive cases in the board's history: A complaint filed against McDonald's in 2014 that claims the company should be held liable for alleged retaliatory actions by its franchisees against workers who participated in daylong strikes as part of the Fight for $15 movement, a union-backed campaign to raise wages. The NLRB declined to comment for this story.

But in labor circles, there is growing speculation that the NLRB under Robb may move to settle the McDonald's case. "Elections have consequences," said Roger King, senior labor and employment counsel with the HR Policy Association, an organization for human resource officers representing major employers, including McDonald's (MCD), when asked to comment on the rumors. "As has been the case for decades, when administrations change, regulatory agencies change course, and that's what's happened at the NLRB."

The NLRB's general counsel is arguably more powerful than the board members themselves, since he or she decides which cases to bring and what legal arguments to advance. (King had been in the running for the NLRB general counsel job himself, but was never nominated. He is a former partner at the law firm Jones Day, which is serving as lead counsel for McDonald's.)

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The McDonald's case began in 2012, when scores of workers filed 291 charges with the NLRB alleging retaliation by McDonald's franchisees, including reductions in hours, interrogations and disciplinary actions for participating in the strike. In 2014, former general counsel Richard Griffin consolidated the charges he found to have merit and issued a complaint naming McDonald's as a "joint employer" that is equally responsible for the retaliation, citing the many ways in which the Golden Arches — a franchising pioneer — controls working conditions even in those restaurants it doesn't own itself.

The McDonald's case goes to the heart of an issue that has vexed unions and regulators for years: How to organize workers and protect their rights when employment relationships are increasingly stratified by franchises, outsourcing, contracts and subcontracts?

If McDonald's were found to be a joint employer, large companies that have increasingly outsourced key functions to reduce costs could be on the hook for labor law violations incurred by partners over whom they exert substantial control. Both academics and industry groups, such as the International Franchising Association, have said that could force some companies to rethink their business models.

To worker advocates, it's a matter of making New Deal-era laws, like the National Labor Relations Act and Fair Labor Standards Act, relevant in a changed workplace.

"I think that's a bellwether issue as to whether this leadership cares about these statutes making sense and applying today," said Sharon Block, executive director of the Labor and Worklife Program at Harvard Law School, who served as head of policy at the Department of Labor until President Trump took office. "Or is this just a way of letting everybody fend for themselves, without the protections that they were supposed to have?"

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Both McDonald's and former NLRB general counsel Griffin fought the case hard, taking about 150 days of testimony and calling scores of witnesses, including 57 McDonald's executives and middle managers. McDonald's said in an October filing that discovery alone had cost more than $2 million.

The record surfaced company practices such as its employee selection system, which franchisees almost universally use, and which Griffin's team had argued gave McDonald's substantial influence over hiring by setting the criteria on which applicants are judged. An operations and training manual also published by McDonald's corporate details job duties down to the second, and the trial revealed that headquarters developed a coordinated response to the Fight for $15 actions, by hiring business consultants who advised franchisees on how to deal with workers who attempted to organize their colleagues.

"I want to be told when I can start terminating a few of them," a store supervisor in New York texted to one such business consultant, in messages released during the trial. "You have to document them 1st," the consultant texted back.

McDonalds said in a statement that while it doesn't comment on pending litigation, "McDonald's USA simply is not a joint employer with its franchisees."

There are only two more scheduled days of hearings left. After that, the NLRB administrative law judge who has been hearing the case will take a few months to issue her decision, which will almost certainly be appealed by the losing party to the agency's board.

However, the case may not even get that far.

In December, general counsel Robb issued a memo to regional offices signaling his intention to reverse direction on many of his predecessor's initiatives. While Robb likely couldn't withdraw the McDonald's complaint completely, he could seek to settle it without deciding the joint employer question, because of one of the flurry of decisions that the board issued in mid-December.

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A brief history: In August 2015, the NLRB ruled in a case called Browning-Ferris Industries that a franchisor or contracting company needed to exert only "indirect control" over the "terms and conditions of employment" at franchisees or contractors — or even simply reserve the right to exert that control — to qualify as a joint employer. Last month, the new board rescinded Browning-Ferris, returning to the old, more stringent standard that required "direct control" over contracted or franchised workers in order to qualify as a joint employer.

Robb may contend that McDonald's wouldn't meet the criteria under the restored standard, and could seek to settle the underlying complaints without pursuing a decision on the joint employer question from the judge.

Still, the original McDonald's complaint had been issued before Browning-Ferris first came down, and some labor experts think the facts support the case that McDonald's can be considered a joint employer under the resurrected standard.

"There's a strong argument to be made that even under the pre-Browning-Ferris standard, there was sufficient evidence of direct and immediate control," said Wilma Liebman, who served as NLRB chair from 2009 to 2011 and has studied the McDonald's case record.

Even if the Republican-dominated board eventually ruled for McDonald's, the NLRB often reverses itself when another party takes power, and Liebman thinks the case should get a decision either way, rather than settling.

"You're not going to get a joint employer finding from this board, but at least there's a record," she said. "It's a setback, but I don't know that I would call it permanent damage."

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