By Daniel H. Handman, partner, Hirschfeld Kraemer, LLP.
Despite popular belief, the fate of fast food franchises around the country does not rest in the hands of Lauren Esposito, an unelected administrative judge for the National Labor Relations Board. Whatever decision Judge Esposito reaches, it will be appealed to the full NLRB and then again to a federal appeals court for review.
To most employment lawyers, the outcome of the McDonald's case is hardly suspenseful. According to a bio on the NLRB's website, Esposito was a field attorney for the NLRB, prosecuting the very type of case she is now hearing and, before that, she was a union-side lawyer in private practice. In short, no one expects McDonald's to win before Judge Esposito. Undoubtedly, that includes the company's counsel who, according to media reports, has criticized the hearing as a "trial by ambush."
The McDonald's case is notable really for being at the intersection of two issues — one legal and one political — which are sure to be debated long after this trial concludes.
Who is an employer?
The legal issue could not seem more basic: who is an employer? It seems easy enough from a logical standpoint, but for the most part, the labor laws in the United States were written dozens of years ago. In this case, the National Labor Relations Act, the statute at issue for McDonald's, was enacted as part of President Franklin D. Roosevelt's "New Deal" in the 1930s, and for the most part, the critical definitions have not changed since then.
That is significant because, of course, the economy has changed dramatically since then. In the case of McDonald's, in the 1930s when the NLRA became law, franchises certainly did not exist on the same scale that they do today. How then can Judge Esposito be expected to decide whether a New Deal-era Congress expected multi-billion dollar franchisors to be included within its reach? The fact remains that they never contemplated the issue because the concept was undoubtedly foreign to them.
Nor is the NLRB the only body faced with such a dilemma. Just last summer, a federal judge in California decided that Uber was an employer of its drivers and thus subject to a variety of labor laws which it had not been following.
While the Uber case is not entirely on point — and it too is being appealed — there are some similarities. Uber maintained that its drivers, who choose when and how much they work, were independent contractors over whom it exercised little to no control. McDonald's similarly argues that as a franchisor, it has no control over the working terms and conditions of employees of McDonald's franchises.
But in each case, the devil is unquestionably in the details. According to its critics and to the federal judge who handled the case at the trial court, Uber provides the app for drivers to locate customers and it sets the prices that must be charged. McDonald's too exercises some control over franchise employees, mandating the uniforms worn, the way food is prepared and the manner in which employees must maintain and present the restaurants to the public.
So is that enough to allow labor unions to sue McDonald's and to organize its franchise employees? That is the question that Judge Esposito will decide at a trial which started last month in New York.
The plight of fast food workers
The similarities with the Uber case don't end with the legal issues. The fate of low-wage workers is a political issue that is simmering right now in the midst of a presidential campaign. As candidates push for an increase in the minimum wage, fast food workers have been front and center calling for a $15 hourly wage – and with some success. California recently became the first state in the country to adopt such a wage.
And who has been leading the minimum wage effort — the same labor unions who are pushing this case before the NLRB. Critics will say that this is just a cynical effort by labor unions, beset by years of depleted ranks in the private sector, to swell their membership by including millions of soon-to-be dues-paying fast food workers. And there is some evidence that the cynical view is correct. Indeed, a minimum-wage hike in Los Angeles led by labor unions specifically exempted unionized employees from its coverage, thus giving unions an easy sales pitch to employers: hire union employees and you don't have to pay the high minimum wage. But labor unions, and the candidates who support them, take the opposite view — that the American worker, long mistreated by multi-billion dollar conglomerates like McDonald's, need a labor union to ensure fair treatment.
So who will win?
At the end of the day, the unions are almost certain to win before Judge Esposito and, if Hillary Clinton wins the presidential election, before the NLRB, as well. (The NLRB has five members, three of whom are traditionally of the same political persuasion as the President). Ultimately, this case will be decided by an appeals court, or perhaps even the U.S. Supreme Court, which will have to determine whether this New Deal-era law is flexible enough to be interpreted in a way that conforms to our ever-changing economy.
Daniel H. Handman is a partner in the Los Angeles office of Hirschfeld Kraemer, LLP, where he represents employers, some in the fast food industry, in labor and employment disputes.