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McDonald's, labor board reach settlement in 'joint employer' case

McDonald's Corp. and the National Labor Relations Board reached a settlement in a case involving the definition of a "joint employer" and a company's responsibility for its franchisees' labor law violations, the fast food chain said March 19.

A McDonald's spokesperson confirmed reports by Reuters to S&P Global Market Intelligence, stating that the company had agreed to settle a case with the NLRB, stemming from alleged firings of employees at some McDonald's franchises. As part of the settlement, according to Reuters, McDonald's avoided being designated a "joint employer," which would have made the fast food giant liable for the actions of workers at its franchisees.

The case was closely watched by the business community and has ramifications for companies and their franchisees beyond the restaurant industry.

The terms of the settlement were not immediately publicly available, and McDonald's noted that the settlement would also need to be approved by an NLRB judge to become final. The case stemmed from McDonald's employees who said they were fired for taking part in 2012 protests calling for a $15 hourly wage and a union.

"We are very pleased to have reached settlement of the NLRB unfair labor practice proceedings involving McDonald's USA and various McDonald's franchisees across the country," a company spokesman said in an emailed statement. "The settlement allows our franchisees and their employees to move forward, and resolves all matters without any admission of wrongdoing. Additionally, current and former franchisee employees involved in the proceedings are receiving long overdue satisfaction of their claims."

"As it has maintained throughout this process, McDonald's USA is not and never has been a joint employer with its franchisees," the spokesperson added. "While the settlement is not yet final, we believe this is major first step in ending this wasteful multi-year litigation."

The NLRB did not immediately return requests for comment.

An unfavorable ruling against McDonald's could have potentially subjected the company as well as other franchises spanning food, retail and other industries to more lawsuits and bargaining with unions representing franchise workers, industry groups have warned, according to the Reuters report.

In December 2017, the NLRB voted to overturn a 2015 ruling that a company could be a joint employer even if it had only indirect control over employees, which would then require direct control as a prerequisite for joint employer qualification.

However, in February, the NLRB withdrew that decision, returning to an NLRB joint employer standard ruling in August 2015 that stipulates that a company can be considered a joint employer if it has "indirect" control over employees. That ruling left some companies concerned that they may be liable for labor violations committed by franchisees.

Despite the judicial efforts to clarify the definition of a joint employer, legislation is also making its way through Congress that would consider a company a joint employer if it "directly" controls hiring and firing as well as pay and supervision.

The Save Local Business Act, introduced July 27, 2017, by Rep. Bradley Byrne, R-Ala., passed the House by a 242-181 margin in November 2017 and is now before the Senate.

Groups including the International Franchise Association have called on the Senate to act on the legislation following the February reversal by the NLRB.