May 04--The discussion at the International Franchise Association in Chicago came off as a call to arms: Panelists warned that franchisees have brushed off the Fight for $15 campaign as a McDonald's problem when it could destroy their businesses.
The panelists, consisting of two lawyers, a professor and a franchisee, all urged franchisees to align themselves in fighting claims that franchisers and franchisees share employment responsibility.
Attending the conference were hundreds of lawyers representing the Oak Brook-based hamburger giant, but also firms such as Culver's, Ben Jerry's, Corner Bakery and Big Boy Restaurants International.
Michael Lotito, a California attorney who specializes in combating union organizing campaigns, said he expects small franchisees to spend so much money fighting organizing efforts that their workers will be forced out of business, eaten up by legal fees. He said he knows of one franchisee that has spent more than $250,000, so far.
This is why the union campaign isn't just a McDonald's problem, Lotito said.
Lotito also predicted that the National Labor Relations Board will agree with its general counsel that McDonald's is a joint employer with its franchisees. It will be a long, hard fought battle that franchisees will initially lose at the NLRB, the lawyer said.
He said he expects the issue will, perhaps in a decade, reach the Supreme Court, where it would be overturned after finding the NLRB had overreached in its definition of joint employer. But by then, Lotito said, many franchisees will be long gone.
David Sherwyn, director of the Cornell Institute for Hospitality Labor and Employment Relations at Cornell University, said there's confusion on what steps to take because the NLRB's general counsel didn't spell out his reasoning for calling McDonald's a joint employer. As a result, no one can say with certainty what kinds of controls between a franchiser and a franchisee qualify them as a joint employers.
Lotito said he knows of franchisers who don't know what to write in franchise agreements that are expiring to protect themselves from being dragged into the joint employer fight. He added that that might lead some franchisers to choose not to renew contracts with small franchisees.
Norman Leon, a Chicago attorney at law firm DLA Piper, said franchisers should be asking themselves if they really need all the controls spelled out in the franchise agreements.
Controls can range from the type of uniform worn to the colors on restaurant walls to the menu typography.
A good rule of thumb, Leon said, is to ask whether a franchiser will pull the plug if a point in an agreement was violated. If the answer is no, then it shouldn't be on the franchise agreement.
Leon also suggested to the audience, mostly lawyers, that they should ask their clients to remove trademarks from paychecks and human resources websites. He also said franchisers need to be careful about technology provided to franchisees. If it is determining hours and wages, then that software ought to be reeled back, Leon said.
Aziz Hashim, owner of 35 franchises tied to multiple chains in Georgia, California and Toronto, said the franchise business model has to be questioned.
"Do we believe franchisees are sufficiently independent?" he asked.
He encouraged other franchisees to reach out to their employees and ask them what they think of the union campaign. Hashim said if franchisees talked to their workers they might find they are happy. He also said they should make employees aware of opportunities for advancement.
Hashim said the fight against unionization won't be won with money but with a comprehensive media message to change the industry's image.
It has been ingrained in operator's minds that customers shouldn't know the difference between a company-owned store and those run by franchisees, Hashim said. He encouraged franchisees to share their stories of starting out earning minimum wages or how they kept open their stores to save jobs during the Great Recession.
"We have to win hearts and minds here," Hashim said.
Last year, the NLRB's general counsel agreed with the joint-employer designation and issued 19 complaints against McDonald's and franchisees. The first hearing on the case took place in March. Additional hearings are expected this month.
Hundreds of worker complaints accuse McDonald's and some of its franchisees of labor law violations against employees who participated in protests beginning in 2012. Those complaints allege McDonald's is a joint-employer, sharing responsibility for the workers and the violations.
Lotito said it isn't a surprise that unions are trying to force employers to recognize them. Union membership in the private sector continues to decline, falling to 6.6 percent last year from 6.7 percent in 2013. Membership peaked in the 1950s at around 35 percent.
Lotito said membership declines are a serious problem for unions because without new members there is no money to participate in the political process.
Sherwyn said organizing a franchisee's operations, spread over different locations, is difficult. So unions are launching corporate campaigns with the goal of pushing the company to recognize the union without an election. In this case, the campaign, backed by the Service Employees International Union, is using the NLRB, to achieve that goal, Sherwyn said.
acancino@TribPub.com
