Federal labor board officials concluded last year that member William Emanuel should sit out a major, ongoing case against McDonald’s that has sparked conflict-of-interest concerns, according to an internal agency document obtained by Bloomberg Law.

The case is among the most significant active matters currently before the National Labor Relations Board. It was filed by a group of workers who are arguing that McDonald’s LLC should be considered a joint employer of the workers in its franchisees’ restaurants and share liability along with the restaurant owners.

The workers allege that managers in franchised restaurants violated labor laws by interfering with their federally protected right to organize in the workplace during Fight for $15 rallies. The litigation—and Emanuel’s ability to participate in the eventual ruling—could impact both the fast food giant and the structure of the entire franchise sector itself.

Emanuel and NLRB Chairman John Ring, both appointees of President Donald Trump, have been asked to recuse themselves from the case by the workers’ attorneys because of alleged conflicts of interest. Executive Order 13770, known as the White House ethics pledge, requires cabinet members and other appointees to sit out matters “substantially related” to their former employers or clients for two years after their appointment. The workers’ attorneys submitted evidence showing that Emanuel and Ring came to the board from law firms that had set up a hotline McDonald’s franchisees could call for legal advice on how to deal with worker protests at their restaurants and created a training program on responding to employee organizing.

An internal “Supplemental Recusal List” dated Feb. 9, 2018, and obtained by Bloomberg Law lists the McDonald’s case as one of several that Emanuel should sit out because of ethics concerns. The NLRB hasn’t publicly announced whether Emanuel or Ring will recuse themselves from the McDonald’s case.

“The Agency doesn’t comment on recusal matters in active cases,” an NLRB spokeswoman said in response to questions about the apparent conclusions in the document. Emanuel’s former law firm, Littler Mendelson, didn’t respond to questions from Bloomberg Law.

Emanuel was previously ensnared in an ethics controversy in February 2018 that caused the board to invalidate a case ruling and led to calls for his resignation from Sen. Elizabeth Warren (D-Mass.). The supplemental recusal list complicates his potential participation in the McDonald’s case and could ultimately affect even nationwide policy on “joint employment” liability for businesses.

Lightning-Rod Case, Issue

The litigation brought by workers backed by the Fight for $15 campaign has taken on unique political importance as it proceeds.

The Obama administration in 2012 undertook a yearslong effort to tag McDonald’s with joint liability in the case. The massive litigation continued as the board implemented a more worker-friendly legal test for joint employer status in 2015, with attorneys arguing that McDonald’s corporate fits the joint employer bill under either test. But the NLRB under Trump moved immediately to reverse the 2015 rules expanding joint employer liability and to settle the unfair-labor-practice case against the company.

McDonald’s has asked the board members—three Republicans and one Democrat—to approve its $170,000 settlement offer after an agency judge rejected it as inadequate. Fight for $15 representatives countered with the recusal motion against Emanuel and Ring in August 2018.

The supplemental recusal list seems to indicate that NLRB officials had already decided last year—ahead of the worker advocates’ motion—that Emanuel should be recused from cases involving McDonald’s. The document states that Emanuel is obligated to recuse himself from cases in which McDonald’s or its restaurant owners are a party because Littler Mendelson “represents many of the franchisees,” agency officials wrote at the time.

Both the recusal motions and the ultimate decision on whether to accept the settlement offer remain pending.

“The McDonald’s settlement should have been voted on months ago by the board and hopefully will be addressed in the immediate near term,” Roger King, a management attorney at the HR Policy Association, told Bloomberg Law.

Supplement Came Same Day as IG Report

Emanuel was a shareholder at Littler Mendelson before his appointment to the board. He’s also been a management-side labor lawyer at other firms, including Jones Day and Morgan, Lewis & Bockius.

Ring also came to the NLRB from Morgan Lewis.

In late 2017, Emanuel joined a 3-2 Republican majority ruling in an unfair labor practice case against Hy-Brand Industrial Contractors Inc. The Hy-Brand decision achieved one of the Trump administration’s priorities for labor and employment policy—reversing the Obama-era “joint employment” rules that made it easier to hold multiple employers liable for labor violations against the same workers.

But the policy change was short-lived. The board withdrew its ruling and the newer, more employer-friendly rules amid public fallout after an agency inspector general’s investigation found that Emanuel should have been recused from the Hy-Brand case due to a conflict of interest.

Emanuel said during the investigation that he was unaware of his old firm’s connections to the dispute. But Inspector General David Berry concluded that his answers “lack a level of credibility” and that the appointee had made inconsistent statements to Congress about his potential conflicts.

Shortly afterward, ethical questions about Emanuel—and Ring—arose again when the NLRB’s Republican general counsel and McDonald’s worked out a settlement offer in the Fight for $15 case.

Attorneys representing the workers argued that it would be improper for Emanuel and Ring to weigh in on whether to accept or reject the settlement because their old law firms did work on behalf of McDonald’s in direct connection with the dispute.

Although the agency hasn’t announced a formal decision, the supplemental recusal list indicates that officials agreed with the worker advocates’ position with regard to Emanuel, at least as of Feb. 9, 2018.

The document is dated the same day the inspector general notified members of a “serious and flagrant problem” in the Hy-Brand case, which suggests that the agency may have been reviewing Emanuel’s recusal obligations itself, in light of the congressional inquiries and IG investigation.

Emanuel was indeed recused from a case involving at least one entity on the recusal list since it was developed—Novelis Corp.

Prepared ‘Based on Feedback’

Labor board members, like most executive agency heads, have obligations about conflicts of interest that stem from federal regulations and executive orders—usually referred to as the Presidential Ethics Pledge.

At the NLRB, board members typically consult a designated agency ethics official directly to determine whether there’s good reason for an individual member to sit out a case. Recusal is usually required in situations in which a board member has ties to a person or entity involved in the litigation or in which a member may benefit financially based on how the matter is finally adjudicated.

The process can be triggered in various ways, including at the agency’s or member’s own discretion. The NLRB usually designates certain officials—such as the executive secretary and their staff—to serve as a sort of gatekeeper ensuring that members who have a conflict in a particular case won’t participate in that adjudication.

The list from the board’s executive secretary’s office states that it was prepared “based on on-going feedback received regarding recusal cases.”

The NLRB and Emanuel didn’t respond to specific questions about which officials were involved in developing the supplemental recusal list.

Emanuel’s two-year obligation under the White House ethics pledge will be up in late September. The White House has granted other presidential appointees waivers of its ethics pledge to allow them to participate in certain matters in which they may have otherwise had a conflict of interest.