McDonald’s can no longer hide behind its franchises

Last week, the top lawyer for the National Labor Relations Board (NLRB) made a commonsense decision. McDonald’s is not just responsible for the quality of the burgers and fries its franchisees make. It’s responsible for the working conditions of the people who flip the burgers and fry the spuds.

In rejecting McDonald’s legal fiction that it controls everything important its franchises do except for anything to do with their employees, the NLRB’s general counsel took a small but important step toward reversing the corporate assault on wages.

The general counsel’s ruling came out of complaints by workers who were punished by McDonald’s and its franchises for protesting low wages, as part of the Fight for $15 campaign. It is illegal to retaliate against workers who are organizing to improve their working conditions. The ruling green-lights hearings into 13 complaints of 78 instances of alleged retaliation against workers, by holding that McDonald’s and its franchisees are jointly responsible for the punitive actions.

{mosads}Of course, McDonald’s — which with a 35 percent return on equity is one of the most profitable big corporations in the nation — and the franchise industry as a whole are crying wolf about the decision, predicting job losses, as every business does whenever it doesn’t like a regulatory decision. But where the business groups are correct is in their statements that if the ruling survives appeals, it will upend regular franchise arrangements and make it easier for workers to organize.

The use of franchises by major corporations to avoid responsibility for the wages and working conditions of their employees is only one example of an economy-wide practice by big business. A separate NLRB complaint highlights another common practice: the use of workers hired by temp services. The labor board is considering a claim by the Teamsters that Browning-Ferris Industries is a joint employer of temp workers who are employed at its recycling facilities.

Another common practice under scrutiny is subcontracting for core parts of a business, as when a federal judge ruled that Wal-Mart was jointly liable for wage theft at Wal-Mart dedicated warehouses run by another company. Big corporations use subcontracting throughout supply chains to avoid responsibility for how workers are paid. Even some hotels are subcontracting housekeeping services.

Corporate strategies to shirk responsibility for their workers’ wages and benefits are a leading reason that corporate profits continue to surge while wages are stagnant. If wages had kept up with productivity during the past 40 years — which is to say, if workers had received a fair share of the wealth they produce — the median income of Americans would be $75,684. That is 46 percent higher than it was last year.

It is becoming increasingly commonplace in Washington for politicians of both political parties to express concern about stagnant wages. But what is still rare is for elected officials to push for modernizing the nation’s labor laws so that workers can organize together for higher wages.

Republicans around the country are doing just the opposite: pushing for laws that strip unions of the ability to collect mandatory dues for workers who they represent in bargaining. Even though only 7 percent of the private workforce is unionized — less than before the National Labor Relations Act was enacted — Republicans continue their relentless assault on workers’ freedom to organize together.

Meanwhile, most Democrats pay scant attention to the dramatic need to strengthen labor laws for workers to have any chance of claiming a fair share of the wealth they produce. An exception was a law enacted this fall by California’s Democratic-controlled state legislature and signed by Gov. Jerry Brown (D), which holds businesses that use temp firms jointly responsible for wages and other work standards.

Democrats in Congress who understand that their party must become real champions of working families should follow the California example. There are a host of reforms needed to reassert the ability of working people to organize fairly in today’s economy. These go well beyond just changes in the rules for union representation, which has been the focus of past labor law fights.

Fundamental changes in labor laws are needed to respond to the corporate attack on wages. Laws to establish the responsibility of big corporations for all the workers — whether directly employed or not — that are part of getting their goods to market. Laws to prevent employers from misclassifying employees as independent contractors. Laws to put teeth into violations of labor laws and wage standards, including meaningful monetary penalties and criminal sanctions for repeated violations.

The emerging divide in the Democratic Party is between Democrats who will hide behind tepid measures, which will have little impact on stagnant wages and hopes, and Democrats willing to stand up to Wall Street and corporate America. Only if Democrats champion bold policies to rebuild the middle class will they have any chance of winning the hearts, minds and votes of America’s disillusioned working families.

Kirsch is a senior fellow at the Roosevelt Institute and a senior adviser to USAction. Follow him @_RichardKirsch.