The franchise business model could be turned upside down if ruling is allowed to stand.
Amid the economic doldrums of recent times, the fast-food industry has been one of the biggest job creators. So far this year, it has added employment at a 4 percent rate, which stands to make this the third straight year at that pace. If only the entire economy had done so well.
But no good deed goes unpunished. Last week, the National Labor Relations Board decided that McDonald’s will have to play by a brand-new set of rules — and if that decision stands, it could affect a lot of other businesses in fast-food and other sectors. It’s a mistake that needs to be reversed before it does real damage.
The ruling by the NLRB’s general counsel says that McDonald’s can be held liable for the employment decisions made in its franchised outlets, which number some 13,000 in this country. So if a rogue franchisee in Sasquatch Hollow violates the law on overtime or wages, the Oak Brook-based corporation can face sanctions.
“This decision changes the rules for thousands of small businesses, and goes against decades of established law regarding the franchise model in the United States,” the company said. The National Retail Federation called it “outrageous.” The Service Employees International Union tweeted gleefully, “HUGE victory for labor & fast food workers!”
Neither side is exaggerating. Imposing this model on McDonald’s would upend a franchise system that has worked well for owners and consumers — and has provided millions of jobs, many of them for people who arrive with few skills. By assigning McDonald’s responsibility for wages, hours, hiring and firing, the agency would make it far easier for labor organizers to turn all these restaurants into one big union shop. Your local McDonald’s owner would see his wages set via a union contract negotiated by faraway corporate executives.
The NLRB takes the view that the company has so much control over the operations of its franchises that it might as well own them. But it’s a hard case to make. Franchise owners decide how many workers to employ; do the hiring; set each employee’s pay, hours and duties;, fire those who don’t work out, and more.
The NLRB has long recognized how the model works. But suddenly it has decided to change settled rules on which much of the economy has been built. The new liability would invite a plague of lawsuits while forcing corporations to drastically alter their operations.
The impact is potentially huge, since more than 8 million people work for franchise operations — 15 percent of all private sector jobs in this country. And that’s leaving out the consequences for consumers, who are even more numerous.
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