The McDonald’s Business Model May Be in for a Big Change

Protestors Rally Across US On National Day Of Action For $15 Minimum Wage
NEW YORK, NY - NOVEMBER 10: Low wage workers and supporters protest for a $15 an hour minimum wage on November 10, 2015 in New York, United States. In what organizers are calling a National Day of Action for $15 and hour minimum wage, thousands of people took to the streets across the country to stage protests in front of businesses that are paying some of their workers the minimum wage. Home care workers, employees in retail and fast food restaurants say that the current minimum is not a living wage. (Photo by Spencer Platt/Getty Images)
Photograph by Spencer Platt—Getty Images

McDonald’s corporate headquarters isn’t currently responsible for employees working at franchised locations, but after Thursday’s labor hearing it could be.

Tensions between McDonald’s Corp. (MCD) and franchise workers began to escalate in 2012 when New York City fast food workers flooded McDonald’s with protests about low pay. The workers claimed that following the strikes, their bosses used intimidation tactics, warning them against talking to union organizers and threatening to fire them if they didn’t stop protesting—behavior for which McDonald’s was not held responsible.

Workers filed complaints with the National Labor Relations Board claiming the fast food chain is a “joint employer” and should be considered just as responsible as franchise owners. That movement has evolved into what we now know as the “Fight for $15.”

In a 2014 hearing, NLRB general counsel Richard Griffin ruled that McDonald’s qualifies as a joint employer since it has significant say in daily operations of its franchises, which make up the vast majority of its restaurants. If that decision is held up today, the Washington Post reports that it could open up McDonald’s to substantial liability. It would also make it much easier for workers to unionize, allowing them to negotiate directly with corporate headquarters rather than individual franchise owners, providing a clearer path in their fight for $15.

Though today’s ruling is exclusive to McDonald’s, it could provide legal precedent for workers at similar franchises, potentially changing the franchise business model permanently. The New York hearing will be followed by two others in regions where similar complaints were issued. If either McDonald’s or its workers choose to appeal the decision, the case could end up in a federal court.

In a statement to Fortune, McDonald’s argued that it doesn’t fit the criteria for what defines a joint employer since it doesn’t “direct or co-determine the hiring, assignment, wages, hours, or any other essential terms and conditions of employment of our franchisees’ employees.” A spokesperson said that if the initial NLRB ruling is held up it would apply “a new legal standard that would undermine a successful American business model that has enabled thousands of families to operate their own small businesses and help support millions of American jobs.”

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