Regulators Aid Union Effort to Kill Franchising

Labor officials participated in liberal conference

Demonstrators protest outside of a Boston McDonalds / AP
September 2, 2014

Several key Labor Department regulators participated in a liberal conference focused on unionizing subcontractors and franchise employees.

Department of Labor Wage and Hour Division Administrator David Weil delivered opening remarks to a room full of union organizers and activists from the National Employment Law Project, a pro-union group partnered with the liberal millionaires and billionaires from the Democracy Alliance, in May.

"I view my task as helping to work with the people in the agency and in concert with worker advocates," he said.

Weil told the gathering that the department has "undertaken a bunch of specific initiatives in particular industries," in order to crack down on employers. The department, he said, has focused specifically on "the hotel industry, the restaurant industry, construction, the agricultural sector, [and] healthcare."

Weil’s enforcement strategy will focus not just on specific complaints from employees of wage theft and workplace violations, but in tackling the structural nature of workplace regulation, he said.

"We’ve developed over time specific approaches to dealing with that and approaches to dealing with that and again approaches that are not just informed by saying ‘industry X has a lot of problems,’ but also ‘here’s how industry X is structured and here is how we can really affect change—how we can really make sure that when we go in the effects of that investigation ripple outward," he said.

The attack on business structures has manifested itself in the current battle over joint employment standards and fast food franchising, which is undergoing extensive scrutiny at the department, as well as the National Labor Relations Board. Labor watchdogs and industry groups slammed Weil’s participation at the conference.

"This further proves what we’ve been saying all along: these things aren’t isolated incidents, but concerted actions by the administration, the NLRB, the Department of Labor to promote the union agenda," said Angelo Amador, VP of Labor and Workforce Policy at the National Restaurant Association.

Labor groups have campaigned for years to unionize fast food workers, who would add hundreds of thousands of dues-paying members to their ranks. These efforts have met little success: Many fast food workers are young and there is high turnover.

However, the biggest obstacle has been the franchising system, in which small business owners pay parent companies like McDonalds to operate under the company trademark. While the corporation controls issues like menu options, the franchisees handle hiring, firing, and setting wages. Labor law has traditionally considered franchisees as separate entities from parent companies, which means that unions would have to organize restaurants piecemeal.

This system, as a NELP white paper reports, is difficult for unions to crack. Franchise owners earn low margins on their investments and increasing labor costs through collective bargaining could prove disastrous for the business owner and union member alike.

"Fast food franchisees themselves are in many cases unprofitable," the report says. The ultimate goal, according to these activists, is to bypass individual franchisees and bring multi-billion dollar parent companies to the bargaining table. Unions could leverage individual worker grievances against franchise owners to bargain with parent corporations directly. They also could more easily organize the entire fast food labor force at once, rather than just individual restaurants.

"By breaking down the joint-employment barrier what unions are hoping to do is spend a lot of time and money to organize one franchise, then demand that McDonalds’ corporate headquarters come to the bargaining table," said Glenn Spencer of the Workforce Freedom Initiative. "That makes it worth the time and money. They’ll ratchet up pressure on the corporate brand."

Labor groups have received a huge boost from the Obama administration in eliminating that last obstacle. In July, National Labor Relations Board General Counsel Richard Griffin, a former union attorney, said in a legal brief that McDonalds could be held liable for the actions of its franchisees even if the parent company had nothing to do with the employment policies at issue.

The NLRB, the federal labor arbiter that oversees unionization, could decide on whether to preserve the firewall between franchisees, subcontractors, and corporations later this year in the Browning Ferris case.

"It’s a big change in labor law and could undermine standards in place for 30 years, standards that have formed basis of entire business models," Spencer said.

While the standards have not yet been revised, labor watchdogs are concerned that regulators are already planning to further undermine them through enforcement. Amador said that the franchising structure extends far beyond the restaurant industry. Many large companies in all sectors use subcontractors and independent contractors to perform tasks outside of the company’s mission, such as janitorial services.

"[Labor regulators] are starting with a conclusion about joint employers and working outward. They already have their mind made up to change the law without congressional approval," Amador said. "How can we trust in a system when they’re already applying law that doesn’t exist yet?"

Three labor regulators participated in the May conference sponsored by the National Employment Law Project (NELP), a pro-union group partnered with the liberal millionaires and billionaires from the Democracy Alliance. Weil was joined at the conference by Michael Hancock of the Wage & Hour Division and David Michaels from the department’s Occupational Safety and Health Administration. The department defended its presence at the conference as educational.

"The department routinely engages in education and outreach events with everyone from NELP to the U.S. Chamber of Commerce to improve understanding and compliance with labor laws, and to improve our knowledge of an ever-changing workplace," a department spokesman said in an email. "Understanding modern business practices such as outsourcing is a critical part of our mission to ensure workers are paid the wages they’ve earned and that they’re safe and healthy on the job."

Ryan Williams, spokesman for labor watchdog Worker Center Watch, said the regulators’ presence at the conference calls into question their credibility to serve as unbiased arbiters, rather than an extension of the unions themselves.

"The unethical and incestuous relationship between top Obama Administration officials and union front groups undermines public confidence in our government," Williams said. "It is impossible for franchise owners to have any confidence in the Department of Labor and view them as a fair and impartial agency when they are actively colluding with the same union bosses that are trying to destroy their businesses."


Union front groups are preparing disruptive protests against fast food restaurants to celebrate Labor Day.


Fast Food Forward, a SEIU-funded worker center, coordinated about 50 protests for higher wages at McDonalds and other franchises across the country in 2013. The group is stepping up those efforts next week, encouraging agitators to engage in "civil disobedience" rather than simple picketing in more than 100 cities.


"They’re picketing at companies that have big brand recognition because that comes with a lot of media attention. Attacking the start-ups and franchisees that will be impacted by this won’t get national media attention," Amador said.


Protests are scheduled to begin September 4.