McDonald’s Versus ‘Fight for $15': Documents Reveal Strategy

A battle between McDonald’s LLC and worker advocacy groups is putting the company’s response to the Fight for $15 campaign—and the role of two prominent law firms—under a microscope.

McDonald’s is fighting a National Labor Relations Board complaint alleging it wields enough control over franchisees and their workers to share legal responsibility in an unfair labor practice case. The dispute involves franchise workers who were allegedly fired and retaliated against for participating in demonstrations demanding a minimum $15 hourly wage and other job improvements.

Newly submitted evidence in the case shows the company hired two high-powered law firms—Littler Mendelson and Morgan Lewis—to assist its franchisees in countering what one McDonald’s human resources officer referred to as “The Opposition,” according to an internal e-mail. The company carefully structured agreements to try to avoid direct control.

“The case is very important legally because it raises this question of joint employer status between franchiser and franchisee,” Wilma Liebman (D), a former NLRB chairman and board member under three presidents, told Bloomberg Law. The rise of franchising, subcontracting, and outsourcing arrangements have generated a lot more interest in the issue in recent years, Liebman said.

McDonald’s has maintained that it only took legitimate steps to assist franchisees in order to “protect its brand.” The legal assistance the company obtained from Littler and Morgan Lewis was part of a variety of “optional tools, resources, and advice” it provides to franchisees, and doesn’t indicate control, the company has said.

Fight for $15 submitted the evidence to bolster its argument that National Labor Relations Board Chairman John Ring (R) and member William Emanuel (R) should sit out the still-pending case because they worked for Morgan Lewis and Littler, respectively, before joining the NLRB last year. That’s part of a broader ongoing debate over possible conflicts of interest for board members.

Glimpse at Strategy

Fight for $15 organized fast food worker strikes at McDonald’s restaurants and other fast food chains to highlight demands for increased pay and the right to bargain collectively. The group says McDonald’s and its franchisees violated federal labor law by firing and otherwise retaliating against workers who participated in the strikes.

Large multinational companies commonly hire prestigious law firms to keep labor organizations out of their workplaces, but experienced practitioners on both the management-side and worker-side said some of McDonald’s moves were unusual.

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 protest movement for improved pay and working conditions, according to a notice from the firm. Morgan Lewis—another heavyweight labor and employment firm with some 2,000 attorneys across the globe—was hired to create a national training program for franchisees and managers to respond to the campaign, e-mails show.

Littler set up a hotline that franchise restaurant “owner-operators” could call for legal advice about how to respond to the protest actions. Callers would have a privileged attorney-client relationship with lawyers on the other end of the line for “15 minutes,” the duration of the call. The franchisee could then establish a separate legal relationship with the law firm, under a “special reduced fee arrangement,” according to the firm’s notice.

The hotline was still operational as of Sept. 11.

“This was coordinated, for sure,” Samuel Estreicher, director of New York University’s Center for Labor and Employment Law, told Bloomberg Law. Estreicher said the brief attorney-client relationship created during the calls is “unusual, but I’m not sure it’s improper,” he said.

Littler Mendelson declined to comment on this story. Michael Lotito, one of three Littler attorneys that owner-operators are referred to on a recorded message, also declined to provide a comment.

Morgan Lewis’ agreement with McDonald’s required franchisees to enter into a separate “Common Interest and Information Sharing Agreement” with the firm. The agreements restricted Fight for $15 attorneys from questioning the franchisees at trial about the details of Morgan Lewis’ systemwide training program for franchisees. One of the e-mails shows McDonald’s human resources officers trying to track down a franchisee or manager who’d attended sessions but failed to sign the agreement.

Morgan Lewis declined Bloomberg Law’s request for comment.

Par for the Course?

Russell Brown, head of the Center for Independent Employees, told Bloomberg Law Sept. 7 that the company’s moves in hiring the firms aren’t extraordinary.

“I don’t think there’s anything unusual about making resources available to the franchisees,” Brown said. Brown, who isn’t an attorney, wouldn’t comment on the Morgan Lewis confidentiality provisions.

CIE represents workers looking to rescind their union membership, and Brown also has a private practice doing union avoidance work. He said the contracts involved in this case are unlikely to trigger federal requirements for companies to report when they hire consultants for the specific purpose of persuading workers not to unionize, or ‘union-busting.’

Other e-mails show McDonald’s apparently using its “Global Risk Intelligence” operation and “Global Security Team” to anticipate Fight for $15 actions across the country. Company officials then “encouraged” owner-operators to “monitor” protestors.

McDonald’s officers also told franchisees to consider reporting any contact by journalists, and to include their phone numbers and the question they asked--a different hotline was provided for this, not related to the Littler hotline.

Settlement on Hold for Now

McDonald’s says the support it offered franchisees in dealing with Fight for $15 doesn’t create a joint employment relationship.

“The evidence overwhelmingly demonstrates that franchisees are responsible for the terms and conditions of employment in their restaurants, and McDonald’s USA merely provides them with advice and optional resources that they may take or leave,” attorneys said in a case filing. “Franchisees control their own labor relations and their responses to the Fight for $15 campaign.”

The case was almost settled—McDonald’s attorneys hashed out a proposed settlement agreement with board general counsel Peter Robb. But an administrative law judge rejected the offer.

The previous board general counsel, a Democrat appointed by President Barack Obama, had vigorously pursued a joint employer finding. The agreement Robb and McDonald’s worked out drops the question, although it would obligate franchisees to give backpay to some individual workers.

The NLRB declined a request for comment.

Recusal Battle Continues

Fight for $15’s argument that Emanuel and Ring shouldn’t get to weigh in on the settlement is based on ethics rules for presidential appointees.

Liebman said Littler’s involvement in the company’s “overall strategy” is “intrinsically related to this case because what’s being litigated are their reactions to protests and alleged retaliation.” She said the arguments for Emanuel sitting out the McDonald’s case are stronger than in Hy-Brand Industrial Contractors, where the board withdrew a major decision after the NLRB inspector general said Emanuel should have recused himself because of a conflict-of-interest.

“I think it obviously raises an appearance problem, same as when Emanuel participated in Hy-Brand,” Liebman said.

An executive order and a White House ethics agreement restrict agency heads and other officials from participating in matters involving parties who were a client of or have a relationship with their previous employer. The recusal obligation for board members lasts for two years after their confirmation.

Ring and Emanuel—and much of the business community who’ve supported them—argue that the obligations only extend to an appointee’s personal former clients, not any business that may have had a contract that different firm attorneys worked on.

“As our pleadings show, this is nothing more than a transparent attempt to interfere with the National Labor Relations Board’s processes,” a McDonald’s spokesperson told Bloomberg law in a Sept. 6 e-mail.

The labor groups have maintained that they have a conflict nonetheless because of what they say was the firms’ crucial role in McDonald’s actions in the underlying dispute. They insist that a provision for appointees to avoid creating even the “appearance” of impartiality therefore bars the two members from the case, although business groups say that standard is practically unworkable.

McDonald’s has filed motions in support of Ring and Emanuel’s participation. Fight for $15’s request is still pending.