Fast Food Industry Looks To Skirt Labor Law, With An Assist From Scott Walker

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SOURCEThink Progress

With fast food workers on the march nationwide, deep-pocketed corporate interests have quietly turned to state lawmakers for help.

The quiet push uses low-profile legislation to shore up a liability firewall that has made it hard for workers in some industries to pursue their labor rights fully since the mid-1980s. Last month, buried in a stack of 59 different laws, Gov. Scott Walker (R) signed a bill that made Wisconsin the latest state to join the party.

Businesses in the state that use franchising agreements to insulate corporate headquarters from legal liability down at ground level will have a slightly easier time thanks to Wisconsin Act 203. The law prohibits state labor agencies and judges from applying the same logic the federal National Labor Relations Board (NLRB) has invoked in recent years to eat away at a common corporate liability shield.

Wisconsin is the seventh state to enact such a policy. Tennessee, Texas, Louisiana, Michigan, Indiana, and Utah have all enacted similar laws in the past year. Gov. Terry McCauliffe (D) vetoed the idea in Virginia and Gov. Nathan Deal (R) is still weighing it in Georgia.

Franchising agreements are most prevalent in the food service industry. Corporate parents that capture most of the profit that restaurant chains generate use the deals to keep themselves off the hook when workers at any given store bring a grievance to court.

Franchise-dependent brands like McDonald’s see major federal threats to their business model and profit margins. The NLRB is acting to restore the interpretation of corporate liability for labor law violations that ruled the American legal system up until the Reagan era, when a different cadre of NLRB officials made it much easier for franchisees to evade liability.

The board has delivered a string of decisions that favor workers over the past couple years, chipping away at the insulation Reagan-era officials provided to corporate interests. The most significant single case in that sequence is still unfolding, however. McDonald’s is at the center of it.

NLRB lawyers announced in 2014 that they believe McDonald’s is a joint employer and cannot evade responsibility when store owners violate worker rights. The company requires franchisees to use a computer system that tracks labor costs in real time — and which workers and managers say is routinely used as an excuse to commit wage theft and other labor law violations to keep a given food store operating in the black.

That case will continue to play out for some months yet, but things have not been going well so far for the corporate side of the argument. If the McDonald’s case ends up establishing a clear joint-employer rule for the fast food sector, it will become far easier to organize fast food worker unions and seek redress of the wage theft, scheduling trickery, and low pay that are endemic in the industry today.

These high-profile cases are beginning to expand workers’ rights and erode legal protections for distant corporations. As the current rules begin to prove hostile to corporate interests, it’s little wonder they are looking to change the rules.

The state laws offer a patchier form of the same armor that congressional Republicans failed to deliver for corporate nesting-doll business models last winter. As budget talks heated up last winter, business interests urged GOP leaders to tuck legislation overriding the NLRB’s joint-employer ruling into that must-pass bill. But the deal the White House struck with Republicans in December was mute on the franchise question.

Wisconsin and its compatriots can’t shelter franchisors from federal agencies or offer protection from suits brought in federal court. But these laws do prevent state-level labor officials from handling franchise businesses with the same logic the NLRB endorsed over the past few years.

For workers, those in-state effects will still have a major impact. Anyone who wants to pursue a wage theft claim or other labor law allegation will have to decide between using state-level systems that can work much faster or turning to the slower federal process that can pursue both of the firms that shape their workplace experience.

“The NLRB did the right thing for workers and Scott Walker reversed that,” Wisconsin AFL-CIO head Stephanie Bloomingdale told the Capital Times.

The changes will cost the state a little over a quarter-million dollars per year, according to Wisconsin’s legislative analysts, because they will require new staff at the state Workforce Development agency.

But while those expenses won’t have a direct bearing on the ultimate outcome of federal franchising fights, an industry trade group is hoping to line up enough gubernatorial allies to spark Congress to shore up the legal firewall protecting the Chipotles and Arbys of the world.

“A dozen states have sent a strong message to Congress,” International Franchise Association Senior Vice President of Public Affairs Matt Haller told ThinkProgress in an email, “that the direct control standard of an employer should remain in effect so franchise businesses can have the certainty needed to grow and create jobs.”

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Alan Pyke
Alan Pyke is the Deputy Economic Policy Editor for ThinkProgress.org. Before coming to ThinkProgress, he was a blogger and researcher with a focus on economic policy and political advertising at Media Matters for America, American Bridge 21st Century Foundation, and PoliticalCorrection.org. He previously worked as an organizer on various political campaigns from New Hampshire to Georgia to Missouri. His writing on music and film has appeared on TinyMixTapes, IndieWire’s Press Play, and TheGrio, among other sites.

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