Op-Ed: A bad rule lets fast-food chains off the hook for workers’ rights

Almost 4 million people work in fast-food restaurants. In recent years, these workers — among the lowest paid in the country and disproportionately women and people of color — have protested their wages and workplace conditions as part of the “Fight for $15” movement, which raised many state and local minimum wages and delivered real gains to low-wage workers.

But the ultimate success of this movement turns on holding employers legally accountable for wages and working conditions. The big legal debate is not over employees’ rights but over who is actually the employer. Recently, the law has taken a wrong turn on this question.

Most fast-food stores are franchised establishments, which means that each store is owned by a small-business operator. But these franchisees take detailed operating directions from big corporate franchisers like McDonald’s, Domino’s Pizza and other fast-food chains. Under the legal concept of “joint employment,” workers should be able to consider both the franchisee and the corporate franchiser their employers if they both control the conditions of work.

Being able to hold the corporate franchiser accountable is crucial because franchisees often don’t have enough money to correct legal violations and don’t set industry standards. Only the franchisers can really compel the stores to improve wage and benefit levels in a meaningful way.

But the push for franchiser accountability has come under attack by Trump appointees to the National Labor Relations Board. In late February, the NLRB, the agency that interprets the law governing the workers’ right to act together to seek better working conditions, significantly narrowed the definition of “employer.” Its new rule says that franchisers like McDonalds are not employers unless they exercise direct day-to-day control over fast-food workers. The U.S. Department of Labor has also limited franchisers’ legal responsibilities in fast-food stores. The Equal Employment Opportunity Commission has promised to apply a similar definition, which would essentially allow corporate franchisers to escape responsibility.

This reversal has been driven by a Republican-dominated NLRB seeking to remake labor law in an employer-friendly way. The agency, now dominated by three Trump appointees, is intensely politicized and has overturned many Obama-era rulings. Some courts have also ruled to limit the accountability of corporate franchisers.

But the fact is, most fast-food franchisers have enormous power over their franchisees’ operations and over the wages and working conditions of fast-food workers. Franchisers can shutter their franchisees’ stores for nearly any reason, threatening the franchisee’s investments. They can restrict franchisees’ business opportunities during and even after the business relationship ends. And they can control how the front-line fast-food workers are managed.

Corporate offices often direct franchisees on how to operate the business. Major investigations of McDonald’s by the NLRB’s general counsel during the Obama administration and of Domino’s Pizza by the New York attorney general’s office found that these franchisers imposed highly detailed manuals on franchise store operators. These manuals often covered hiring, scheduling, employee appearance and work responsibilities. While franchisers sometimes call their instructions “recommendations,” franchisees typically interpret them as requirements given the extent of corporate monitoring and the franchisers’ contractual power over their businesses.

In one case in California, a group of McDonald’s employees said that they suffered wage theft when McDonald’s told its franchisee to use flawed software that systematically underreported wages owed. McDonald’s software logs when employees clock in and out of work. But the software incorrectly calculated owed overtime only after 50 hours in a week, rather than 40. These workers filed suit to recover owed wages from corporate McDonald’s based on its participation in and failure to correct these violations. The federal appeals court in California, however, rejected the claim against McDonald’s, ruling that it didn’t have control over the “day-to-day aspects” of work even though it gave bad tools to the franchisee.

The NLRB is wrong to rule that franchisers must directly supervise store employees to be responsible as employers. That definition simply does not reflect the on-the-ground reality of who has control over working conditions in most fast-food restaurants.

Beyond fast food, from transportation companies such as Uber and FedEx to entire industries such as construction and commercial cleaning, companies often structure their operations to shield themselves from employer status. The welfare of these low-wage workers will require agencies and courts to closely examine the control that corporations exert over the workplace. The use of contractors and new technology should not be allowed to insulate these corporations from employer responsibility.

Andrew Elmore is a law professor at the University of Miami School of Law. Kati Griffith is a law professor at Cornell’s School of Industrial and Labor Relations.