With the addition of Wisconsin last month, seven states have now passed laws designed to shield corporate headquarters from legal liability for labor law violations by its franchises, particularly in the fast food business. Alan Pyke at ThinkProgress reports:
Franchising agreements are most prevalent in the food service industry. Corporate parents that capture most of the profit that restaurant chains generate use the deals to keep themselves off the hook when workers at any given store bring a grievance to court.
Franchise-dependent brands like McDonald’s see major federal threats to their business model and profit margins. The NLRB is acting to restore the interpretation of corporate liability for labor law violations that ruled the American legal system up until the Reagan era, when a different cadre of NLRB officials made it much easier for franchisees to evade liability.
The board has delivered a string of decisions that favor workers over the past couple years, chipping away at the insulation Reagan-era officials provided to corporate interests. The most significant single case in that sequence is still unfolding, however. McDonald’s is at the center of it.
Two years ago, NLRB lawyers concluded that McDonald’s is a “joint employer” and liable when a franchise store violates worker rights, including wage theft and other labor law violations. Before that ruling, class action lawsuits and unionizing efforts were hamstrung because they could only be filed against the local owner and couldn’t touch any of the Illinois-based company’s nearly $6 billion in annual profits. The specific case that drew that ruling was focused on the tracking software that headquarters requires franchises to use, something that spurs managers to engage in scheduling trickery and wage theft.
While the state laws being signed by governors like Wisconsin’s Scott Walker and vetoed by those like Virginia’s Terry McAuliffe can’t fully insulate corporate headquarters, they are part of an effort the industry hopes will push Congress to restore the liability firewall back to how the Reagan administration arranged it. If they succeed, workers lose.