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McDonald’s Trump-era NLRB Settlement Faces D.C. Circuit Review

Dec. 9, 2021, 9:46 PM

McDonald’s Corp. will try to convince a federal appeals court in Washington to reject a union’s bid to revive the massive unfair labor practice case against the fast-food giant that began during the Obama administration and settled in the Trump era.

Lawyers for both McDonald’s and the National Labor Relations Board will be on the same side as they defend the settlement against an attorney for the Service Employees International Union during oral arguments Friday at the U.S. Court of Appeals for the District of Columbia Circuit. The deal resolved claims that McDonald’s was jointly liable with its franchisees for retaliating against workers who participated in Fight for $15 demonstrations.

The union’s challenge to the settlement—which called on franchisees to pay approximately $170,000 and absolved McDonald’s of any responsibility as a “joint employer"—raises allegations that a former Republican board member’s participation in the case violated ethics rules and tainted the board’s decision embracing the agreement.

If the appeals court revives the case, McDonald’s could again face the risk of sharing liability for its franchisees’ labor violations and potentially be forced to the bargaining table if a franchise restaurant unionized.

The NLRB general counsel’s office in 2014 filed charges against McDonald’s and several franchise restaurants. The case grew into the largest ever adjudicated by the agency, according to the administrative law judge who presided over a 150-day trial in the matter.

McDonald’s emailed Trump-era NLRB General Counsel Peter Robb about a month after he took over the agency’s legal arm—including the prosecution of the joint employer case—in December 2017. The company asked Robb to use his “prosecutorial discretion to end this waste of taxpayer resources and consider” settling the case.

The agreement Robb reached was rejected by Administrative Law Judge Lauren Esposito in June 2018, suggesting McDonald’s “purposefully delayed” the case until the NLRB was under Republican control. She called Robb’s decision to move for a settlement just before the close of hearings “incomprehensible.”

But two Republican board members countermanded Esposito in a 2-1 decision in December 2019, saying the terms were reasonable and ordering the judge to accept the settlement agreement. Lauren McFerran, then the board’s sole Democrat and now its chair, dissented.

The SEIU’s appeal of the board’s ruling will go before a three-judge D.C. Circuit panel composed of Neomi Rao, a Trump appointee, Laurence Silberman, a Reagan appointee, and Judith Rogers, a Clinton appointee.

Arbitrary and Unethical?

The SEIU and the union’s Fast Food Workers Committee argued in a brief that the NLRB lacked substantial evidence—and violated its own procedures and precedents—when it reversed Esposito.

The board, for example, incorrectly applied a higher legal standard than it should have when it reviewed Esposito’s ruling, reassessing her decision from scratch rather than examining it for an abuse of discretion, the union said.

“This is textbook arbitrary and capricious reasoning which the Court should not accept,” the SEIU said in the brief.

The union also asserted that former NLRB member William Emanuel should have recused himself because his former firm, Littler Mendelson P.C., represented McDonald’s and its franchisees in connection with the case.

Emanuel’s tenure at the board was marked by his improper participation in a December 2017 ruling that had tightened the legal standard for determining whether a company is a joint employer of another firm’s workers. The NLRB withdrew that tainted decision in February 2018 and turned to notice-and-comment rulemaking to release an employer-friendly regulation for joint employment in February 2020.

The NLRB in September 2020 rejected the union’s request to reopen the record to consider new evidence showing Emanuel should have withdrawn from the McDonald’s joint employer case.

Even if the D.C. Circuit doesn’t find that Emanuel tainted the ruling on the McDonald’s settlement, it should at least send the case back to the board to consider the new evidence about Emanuel’s involvement, the union said.

McDonald’s and NLRB Agree

The NLRB defended Emanuel’s participation in the case, noting in a brief that his former firm didn’t represent either party in the litigation at hand.

“Member Emanuel provided a reasoned explanation for why he, in consultation with the Board’s Designated Agency Ethics Official, decided not to recuse,” the board said.

While McDonald’s argued in a brief that Emanuel’s participation comported with ethics requirements, the company said the D.C. Circuit lacks the jurisdiction to consider that issue. The union didn’t complete a procedural requirement to raise the issue on appeal, plus the court can’t review an individual member’s choice to participate, the company argued.

The NLRB also said it acted within its “broad discretion” to approve the settlement agreement, which accomplished much of what winning the case would have done.

The board wasn’t required to review Esposito’s settlement decision deferentially, McDonald’s argued. Mandating otherwise would “confound” the appeals court’s deferential standard for reviewing NLRB decisions, the company said.

“If this Court adopted Petitioners’ argument, courts of appeals would be forced to assess whether the Board abused its discretion by finding that the ALJ abused its discretion,” McDonald’s said.

But regardless, the NLRB’s analysis of the judge’s decision aligns with abuse-of-discretion review, the company said.

An SEIU attorney, Micah Wissinger of Levy Ratner P.C., and a lawyer for McDonald’s, Pratik Shah of Akin Gump Strauss Hauer & Feld LLP, declined to comment. The NLRB didn’t respond to requests for comment.

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

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

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