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McDonald’s NLRB Settlement Sparks Little Worry at D.C. Cir. (1)

Dec. 10, 2021, 8:25 PMUpdated: Dec. 10, 2021, 11:40 PM

McDonald’s Corp. appears likely to escape any further litigation over a contested National Labor Relations Board settlement that absolved the fast-food giant of any joint liability for unfair labor practices committed by its franchisees.

During Friday oral argument before a three-judge panel of U.S. Court of Appeals for the District of Columbia, two judges tapped by Republican presidents seemed to find no fault to NLRB officials resolving—over the objections of an administrative law judge—a case that was started by the agency’s top lawyer during the Obama administration.

A D.C. Circuit decision rejecting the Service Employees International Union’s attempt to reopen the case would likely end what was once viewed as a potential existential threat to the franchise model. A ruling against McDonald’s could have made it liable for franchisees’ conduct and possibly forced it to the bargaining table if a franchise restaurant unionized.

The NLRB general counsel alleged in 2014 that McDonald’s jointly employed workers who were retaliated against for participating in Fight for $15 demonstrations seeking better wages and union representation. The case grew into the largest that the agency ever adjudicated, according to the administrative law judge who oversaw the 150-day trial in the matter.

After the Trump administration’s NLRB general counsel took over the case, he brokered a settlement that cost franchisee restaurants about $170,000 in backpay to affected workers. McDonald’s faced no liability and admitted no wrongdoing under the deal.

Two Republican NLRB members in 2019 reversed an administrative law judge’s order rejecting the settlement agreement in a 2-1 decision.

The SEIU and the union’s Fast Food Workers Committee challenged the board’s order at the D.C. Circuit. The three-judge panel handling the case is composed of Neomi Rao, a Trump appointee, Laurence Silberman, a Reagan appointee, and Judith Rogers, a Clinton appointee.

Abuse of Discretion?

McDonald’s attorney, Pratik Shah of Akin Gump Strauss Hauer & Feld LLP, defended the settlement agreement, saying the aggrieved workers wouldn’t have gotten a penny more from a full judgment against the company and its franchisees.

But the union’s lawyer, John West of Bredhoff & Kaiser PLLC, argued that the NLRB improperly accepted a deal that let McDonald’s walk away scot-free despite the voluminous evidence showing it coordinated and directed franchisees’ union-busting tactics.

Part of the board’s faulty decision making was that it applied the wrong standard when reviewing the judge’s ruling that rejected the deal, reassessing it from scratch instead of a more deferential standard that looks for abuse of discretion, West said.

Rao questioned why the board would be bound to a particular standard of review for administrative law judge rulings.

“The board ultimately has the statutory authority—ALJs only decide cases because they have some delegated authority from the board,” Rao said. “They don’t have some independent authority to decide settlements.”

Silberman said the NLRB defers to judges’ credibility determinations on testimony, but it doesn’t on broader issues of law or policy.

Silberman characterized the Trump-era general counsel’s choice to settle the case, and the board’s decision to approve that deal, as one of policy preferences, which always shift when partisan control of the agency changes.

“Isn’t that exactly why Biden fired the general counsel,” Silberman said in reference to the president’s Inaugruation Day sacking of the agency’s top lawyer during the Trump administration.

Ethics Allegations

The SEIU’s lawyer also argued the board’s decision on the settlement was invalid because then-NLRB member William Emanuel should have recused himself based on his former firm, Littler Mendelson P.C., being involved in the underlying dispute.

Littler Mendelson, the largest employer-side labor law firm in the country, was hired to provide guidance to McDonald’s franchisees on how to counter the Fight for $15 movement.

Rao and Silberman seemed cold to this argument, each saying that contesting Emanuel’s participation should have come through a claim that there was a due process violation, which the union didn’t raise.

Rogers, the third member of the judicial panel, appeared concerned that Emanuel may have created an appearance of impropriety by taking part in the case, which would violate government ethics regulations.

But NLRB lawyer Joel Heller said Emanuel didn’t violate those rules because Littler Mendelson didn’t represent a party in the McDonald’s case at the NLRB.

The case is Fast Food Workers Committee v. NLRB, D.C. Cir., No. 20-01516, oral argument 12/10/21.

(Updated with additional reporting.)

To contact the reporter on this story: Robert Iafolla in Washington at riafolla@bloomberglaw.com

To contact the editors responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com; Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com