The International Franchise Association (IFA) is flying fast food store owners and other franchisees into Washington on Tuesday to drum up congressional opposition to a recent legal decision that could make corporations liable for how franchise employees are treated. The trade group expects more than 350 business owners from both the franchisee and franchisor sides of the business model to show up at its event this week, according to The Hill. Speaker John Boehner (R-OH) and former Republican Governors Association head and Mississippi Gov. Haley Barbour are scheduled to speak to the group, and the paper reports that top Senate Republicans will introduce legislation targeting federal labor regulators in general later this week.
The top attorney for the National Labor Relations Board (NLRB) determined in July that McDonald’s exerts so much control over how franchisees operate that they are responsible for labor law violations committed by franchise owners. That finding has yet to be tested in court, but if it holds up and is applied beyond the nation’s largest fast food chain, it would make it much harder for industries that rely on franchising to stymie workers’ attempts to exercise their labor rights.
IFA President Steve Caldeira said the board’s decision about McDonald’s franchisees “would essentially take away their autonomy to run their own business.” But franchisees enjoy little autonomy under the restrictive agreements they sign with the corporation now.
McDonald’s sends both formal company inspectors and secret shoppers into some of its stores to verify that the owners are keeping up with the exacting requirements of its contracts. It installs a computer system that monitors the money coming in and going out of each store at all times, automatically alerting managers if their labor costs get too high — an occurrence that can trigger labor law violations such as requiring workers to clock out but keep working or remain on-site without pay until the computer system reports that the store is back in the black.
Nine in 10 fast food workers report wage theft. The industry pays corporate CEOs 1,200 times more than it pays the typical worker. McDonald’s made $5.6 billion in profit on $28.1 billion in total revenue last year.
Most fast food companies require franchise owners to demonstrate a personal net worth in the millions of dollars before they are eligible to run a store. McDonald’s won’t entertain franchise applications from anyone who doesn’t have at least $750,000 in non-borrowed assets.
The eagerness of IFA members to take up McDonald’s cause against the NLRB indicates that many other companies fear they are vulnerable to the same arguments about corporate control over franchise workplaces, and would ultimately face the same consequences for labor violations that the board’s lawyer believes McDonald’s should face.
It also signals that franchise owners and their corporate bosses are more afraid of workers’ power than of the enforcement mechanisms that are supposed to punish wage theft. While workers have won several multi-million-dollar wage theft settlements this year, the legal systems that govern wage and hour violations around the country are generally ineffective. In California, where labor law is robust, workers have a less than one-in-five chance of recovering lost wages even when they prove they were robbed and win a judgment for restitution from the state. Wage theft steals more money each year than every bank robbery and store holdup in America combined.