“Do You Want Liability With That?” The NLRB McDonald’s Decision that could undermine the Franchise Business Model

On July 29, the National Labor Relations Board (“NLRB”) General Counsel authorized NLRB Regional Directors to name McDonald’s Corp. as a joint employer in several complaints regarding worker rights at franchise-owned restaurants. Joint employer liability means that the non-employer (McDonald’s Corp.) can be held responsible for labor violations to the same extent as the worker’s “W-2” employer.

In the U.S., the overwhelming majority of the 14,000 McDonald’s restaurants are owned and operated by franchisees (as is the case with most other fast-food chains). The franchise model is predicated on the assumption that the franchisee is an independent contractor – not an employee of the franchisor. Generally, the franchisor owns a system for operating a business and agrees to license a bundle of intellectual property to the franchisee so long as on the franchisee adheres to prescribed operating standards and pays franchise fees. Franchisees have the freedom to make personnel decisions and control their operating costs.

Many third parties and pro-union advocates have long sought to hold franchisors responsible for the acts or omissions of franchisees – arguing that franchisors maintain strict control on day-to-day operations and regulate almost all aspects of a franchisee’s operations, from employee training to store design. Their argument is that the franchise model allows the corporations to control the parts of the business it cares about at its franchises, while escaping liability for labor and wage violations.

The NLRB has investigated 181 cases of unlawful labor practices at McDonald’s franchise restaurants since 2012. The NLRB has found sufficient merit in at least 43 cases. Heather Smedstad, senior vice president of human resources for McDonald’s USA, called the NLRB’s decision a “radical departure” and something that “should be a concern to businessmen and women across the country.” Indeed it is, but it is important to note that General Counsel’s decision is not the same as a binding NLRB ruling and that it will be a long time before this issue is resolved, as McDonald’s Corp. will no doubt appeal any rulings.

For more about the potential effects of this decision, check back on Wednesday.

Luke Wingfield

Luke A. Wingfield is an associate with McBrayer, McGinnis, Leslie & Kirkland, PLLC. Mr. Wingfield concentrates his practice in employment law, insurance defense, litigation and administrative law. He is located in the firm’s Lexington office and can be reached at lwingfield@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law and does not constitute legal advice.

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NLRB Continues to Expand its Reach

In two recent actions, the National Labor Relations Board (“NLRB”) continued its activist role in supporting labor unions’ organizing efforts. In one case, the NLRB expanded “micro-units” to the retail industry. In another instance, the NLRB entered into a reciprocal arrangement with the U.S. Department of Labor (“DOL”) to assist in enforcing the Occupational Safety and Health Act (“OSHA”) and the Fair Labor Standards Act (“FLSA”).

In Macy’s, Inc. v. Local 1445, United Food and Commercial Workers Union, decided on July 22, 2014, the NLRB permitted the cosmetic and fragrance workers employed in a single Macy’s store in Massachusetts to organize. This marked the first time that the NLRB had approved a so-called “micro-unit” in the retail industry. The Board rejected Macy’s argument that permitting the UFCWU to organize cosmetic and fragrance workers in one store would “allow a proliferation of micro-units based solely on the products sold by employees,” resulting in “chaos and disruption of business.”

The Macy’s decision extended the principle, enunciated in Specialty Healthcare & Rehabilitation Center of Mobile, 357 NLRB No. 83 (2011), that it was “appropriate” under Section 9 of the National Labor Relations Act (“NLRA”), 29 U.S.C. § 159(b), for a labor union to organize and represent a small group of employees at a single worksite. That case involved certified nursing assistants in an extended care facility. The federal appellate court that includes Kentucky upheld the Board’s decision in the healthcare industry in Kindred Nursing Centers East, LLC. V. NLRB (6th Cir. 2013).

Before Specialty Healthcare, labor unions had traditionally attempted to organize the largest number of employees per unit. Now their strategy is to target smaller units to counter broader employer organizing avoidance efforts. Smaller units will be easier to organize, and union elections could be held quickly, giving employers little time to react. Furthermore, multiple labor organizations could seek to organize several different groups of employees in a single facility.

The Board has also become involved in enforcement actions beyond the NLRA. In a recent memorandum, the NLRB’s General Counsel advised regional directors that when investigating unfair labor practices (“ULP”) charges, investigators should encourage each charging party to file a claim if the person “divulges facts that suggest that an employer may have committed a possible [OSHA or FLSA] violation.”  Before this action, the Board had already enlisted the assistance of DOL employees investigating OSHA whistleblower complaints to encourage claimants to file ULP charges to take advantage of the NLRA’s longer statute of limitations.

For the next two years at least, the NLRB will likely continue to develop new ways to expand its reach into the employer-employee relationship. Employers should perform frequent workplace audits to ensure that they are in the best position to minimize problems in labor-management relations. For more information, contact your MMLK employment law attorney.

 Kembra Sexton Taylor

Kembra Sexton Taylor, a partner located in the firm’s Frankfort office, practices in the areas of labor and employment, personnel, administrative, regulatory, appellate, and insurance defense law. She has extensive experience in representing clients regarding wage and hour, OSHA, state personnel, and other regulatory matters. She can be reached at taylor@mmlklaw.com or (502) 223-1200.

This article is intended as a summary of federal and state law and does not constitute legal advice.

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Congress Enacts Far-Reaching Overhaul of Nation’s Workforce System

In the midst of all the publicized dysfunction, Congress managed to pass a major piece of employment-related legislation quickly and with little fanfare. On July 22, 2014, President Obama signed the Workforce Innovation and Opportunity Act (WIOA) – a bipartisan, bicameral bill introduced on May 21, 2014 – into law. According to the United States Department of Labor, “WIOA is designed to help job seekers access employment, education, training, and support services to succeed in the labor market and to match employers with the skilled workers they need to compete in the global economy.”   WIOA marks the first legislative reform in 15 years of the public workforce development system.

 President Obama Rally

Generally, the law streamlines programs, reporting, and administration in the workforce development system. WOIA eliminates 15 existing federal training programs, including Workforce Investment Act (WIA) incentive grants, WIA pilot and demonstration projects, and the Workforce Innovation Fund (WIF). It creates common measures across core programs for both adults and youth, and mandates a single, unified plan for all core programs.

WIOA retains the basic structure of WIA, i.e., occupational training; adult basic education; literacy and English language acquisition; and vocational rehabilitation. The act also reaffirms the Wagner-Peyser Act of 1933 (as amended by the WIA passed in 1998), which initially provided for a national employment system managed by the states. WOIA improves upon the current WIA in several, key areas by:

  • streamlining state and local workforce development bureaucracies;
  • reducing the size of state and local and state workforce boards;
  • providing standardized metrics for workforce boards and training providers;
  • increasing flexibility for training at the local level;
  • encouraging local authorities to develop programs that prepare trainees for industry-recognized credentials; and
  • abolishing “sequence of services” regulations, allowing trainees to get credit for prior learning and other knowledge they bring to training.

The majority of WIOA provisions will become effective on July 1, 2015, the first full program year after enactment. However, the Act includes several provisions that become effective on other dates. For example, the WIA state and local plans remain in effect for plan year 2015, and the new “State Unified Strategic Plan” is to be submitted for plan year 2016, which begins July 1, 2016. In addition, the WIA performance accountability provisions will take effect at the beginning of plan year 2016.

The Act authorizes approximately $9.5 billion in funding for 2015. Although a portion of this money is reserved for anti-poverty programs such as Job Corps, $2.8 billion will fund training open to a wide range of U.S. workers. Funding will increase slightly through 2020.

The new Act recognizes that employer engagement in the process is the key to effective, contemporary workforce development. Your business or employer association can become involved and benefit from WIOA’s provisions by:

  • qualifying as a training provider and obtaining a competitive grant from your local workforce board;
  • getting paid for training through an individual training account or training contract;
  • being reimbursed by your local workforce board for the on-the-job, incumbent-worker, or customized training you provide;
  • developing a partnership with a local training provider, such as a high school or community college, to help plan and assist in providing services;
  • entering into a sector partnership with other local stakeholders to develop a strategy for closing a skills gap in your industry;
  • serving on or chair your local workforce board;
  • participating in a business consultation convened by your local workforce board;
  • becoming involved in the process that produces your Kentucky’s four-year strategic plan for workforce development; and
  • joining the consortium that runs your local one-stop center.

For more information about how you can benefit from this far-reaching overhaul of the nation’s workforce development system, contact your MMLK employment law attorney.

Kembra Sexton Taylor

Kembra Sexton Taylor, a partner located in the firm’s Frankfort office, practices in the areas of labor and employment, personnel, administrative, regulatory, appellate, and insurance defense law. She has extensive experience in representing clients regarding wage and hour, OSHA, state personnel, and other regulatory matters. She can be reached at taylor@mmlklaw.com or (502) 223-1200.

This article is intended as a summary of federal and state law and does not constitute legal advice.

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“STOP”: Four Tips For Document Preservation When Facing Potential Litigation

In today’s digital environment, it is crucial that employers act fast when faced with a suit (or the threat of suit) by an employee or ex-employee. When potential litigation is on the horizon, the first step should always be to contact legal counsel. The next step should protecting documentation that might be relevant to the dispute. Keep in mind this acronym to make sure you are following that right steps for documentation preservation:

Search for employees that might possess information pertaining to the dispute. This might include supervisors, managers, or people who shared a workspace with the claimant, but it might also include others not under the direct supervision of the company, such as independent contractors or consultants that worked with the claimant.

Think about all sources of information – smart phones, tablets, cloud-based servers, thumb drives, work email accounts, etc. Once the sources are identified, consider whether you have and can maintain access to them. In some cases, it may require notifying the claimant that he must turn over password information or relinquish his work-issued devices, but it is highly suggested you contact legal counsel before proceeding with this step.

Order a litigation hold on relevant information. Instruct employees to not destruct, forward or edit the relevant documentation in any way. In-house destruction procedures (such as shredding or the automatic email deletion) should be cancelled until further notice from counsel. Litigation hold instructions should be made in writing and provide explicit instructions. The instructions should identify the type of materials and date ranges that are subject to the hold. A litigation hold should also identify to whom questions or concerns about the hold can be directed.

Present all information to counsel. He or she will then determine exactly what information needs to be preserved and for how long. Do not think that you, as an employer, know what information is important. By getting rid of documentation, even without ill intent, you may be hurting your ability to present a defense to the claims.

Stop Sign Hand

No employer likes facing employee-related litigation, but it is important to “STOP” and take time to ensure document preservation in the wake or threat of a suit.

Ben Riddle

Benjamin L. Riddle is an associate in the Louisville, Kentucky office. Mr. Riddle is a member of the firm’s Litigation team, where he focuses his practice on employment law, commercial disputes and personal injury matters. Mr. Riddle can be reached at (502) 327-5400, ext. 305 or briddle@mmlk.com

This article is intended as a summary of newly enacted federal law and does not constitute legal advice.

 

 

 

 

 

 

 

 

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Keeping Off-The-Clock Work On Your Radar

There are lots of things that an employer must be mindful of on an ongoing basis, but near the top of that list should be the prohibition of non-exempt employees’ off-the-clock work. This common problem can easily escape an employer’s attention, but it can have an incredibly negative and costly impact if an employee (or, employees) brings a wage and hour suit. Just ask LinkedIn.

On August 4, the U.S. Department of Labor (“DOL”) announced that LinkedIn Corp. agreed to pay approximately $6 million in overtime and damages to 359 current and former employees after an investigation found the online career networking company violated the Federal wage law by allowing employees to perform off-the-clock work. LinkedIn will pay more than $3.3 million in retroactive overtime wages and more than $2.5 million in damages to workers in California, Illinois, Nebraska and New York. Shannon Stubo, vice president of corporate communications for the company said, “”[The incident] was a function of not having the right tools in place for a small subset of our sales force to track hours properly.” According to the DOL, in addition to the settlement payment, LinkedIn will train all employees that “off-the-clock work” is prohibited for all non-exempt workers.

Businesswoman With Stack Of Document

This problem often escapes the attention of employers because of the mindset that hardworking employees are a good thing for any business. Employees should be encouraged to go above and beyond, even if that means working off-the-clock, right? Wrong. Every company with non-exempt workers must consider a zero tolerance policy that prohibits off-the-clock work, and understand that violations of that policy may be met with claims for back-pay and an equal amount in damages.

It cannot stop with a policy, though, because too often the policy says one thing, while the company atmosphere encourages the opposite. Supervisors and managers must understand that encouraging non-exempt employees who “go the extra mile” or “show extra dedication” by working overtime may lead to employer liability. It is not enough to say, “We will not compensate for overtime,” then stand by and watch employees put in overtime. Here are some ways that you can encourage a work environment that does not tolerate off-the-clock work, including

Ensure that you do not require non-exempt employees to perform work-related tasks outside of work hours.

In today’s 24/7 environment, it is hard to leave work at the office. If you are an exempt employee and send your administrative assistant an email at midnight, preface it with a reminder that the email can be answered in the morning. Make sure your employees know that there is no expectation that they respond outside of their normal work hours. While it is not unlawful for non-exempt employees to perform such activities outside normally scheduled hours, it is unlawful for non-exempt employees to perform these activities without being paid in accordance with wage and hour laws. The only exception to this is the “de minimis” rule, which allows for insubstantial or insignificant periods of time worked outside the scheduled working hours to be disregarded. The de minimis rule recognizes that there are some practical limitations to precisely recording time worked in every instance (such as quickly checking one’s inbox on the daily commute), but employers should be cautious. The work that may be excluded pursuant to the de minimus rule should be of such short duration and frequency to amount to no more than a smidgeon (i.e., think seconds or minutes, not hours).

Have a modern timekeeping method.

In 2014, there is no reason that anyone should be keeping personally worked hours by hand. In 2011, the DOL offered a timesheet application for smartphones, which enables employees to independently track their hours to help determine the wages they are owed. Employers still relying on manual or outdated timekeeping systems can face increased exposure to wage and hour audits and/or lawsuits. By using modern management solutions, like the DOL application, employers can ensure that employees acknowledge and keep track of the hours they work and that someone, such as an HR manager, is constantly reviewing those hours to ensure no overtime is logged.

If overtime cannot be avoided, make sure the employee records it.

There are instances in which non-exempt employees may need to work more than their normal forty-hour workweek. If this is the case, make sure that the employee clears the additional time with a manager or supervisor and records this overtime in their hours. Too often, non-exempt employees just follow the lead of their supervisor, who may be an exempt employee, and do not realize that the rules are different for them.

If you are an employer, it is your responsibility to make sure that non-exempt employees are compensated for all hours worked. If you allow off-the-clock work to escape your radar, you might soon find yourself in the legal crosshairs of a wage and hour claim.

 

Ben Riddle

 

 

 

 

 

Benjamin L. Riddle is an associate in the Louisville, Kentucky office. Mr. Riddle is a member of the firm’s Litigation team, where he focuses his practice on employment law, commercial disputes and personal injury matters. Mr. Riddle can be reached at (502) 327-5400, ext. 305 or briddle@mmlk.com

This article is intended as a summary of newly enacted federal law and does not constitute legal advice.

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McBrayer & Blackstone Media Present 8 Do’s & Dont’s of Social Media!

Software concept: cloud of program icons

LEARN HOW TO KEEP YOUR SOCIAL MEDIA MARKETING EFFECTIVE AND LEGAL AT THE SAME TIME.

McBrayer has teamed up with Blackstone Media to present ways that you can use social media to generate leads for your company while staying within the legal parameters. Presenters Amy Cubbage, Cindy Effinger, and Taylor Trusty will provide practical advice that you can use immediately in your marketing, hiring/human resources, and crisis management plans.

 

Join us on 8/25 from 8:30 a.m. to 10 a.m.

(breakfast provided)

Central Bank
9300 Shelbyville Road
Community Room, 2nd floor
Louisville, KY 40222

REGISTER TODAY!

Click here and use “MMLK15″ for a discounted rate of $15 per person.

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Do You Enjoy Our Blog? Nominate Us!

Dear Reader,

The American Bar Association is working on its annual list of the 100 best legal blogs. If you enjoy this blog, we would sincerely appreciate your support by completing a very short “Friend-of-the-Blawg” form found here.   Deadline is this Friday, August 8 at 5:00 p.m. ET.

Thanks so much for your support! We hope you continue to find our articles informative and insightful.

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