.JONES D.AY

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Mr. Barry J. Kearney

May 22. 2014

Associate General Counsel of the Division of Advice National Labor Relations Board 1099 14th St. N.W. Washington, D.C. 20570-0001 harry .kearney@nlrb.gov

Re: Fast Food Workers Committee (McDonald's USA. LLC), Cases No. 2-CA-093893, 2-CA-093895. 2-CA-093927, 2-CA-094224, 2-CA-094679, 2-CA-097827, 2-CA- 097305, 2-CA-98604, 2-CA-098009, 2-CA- 098662, 2-CA-098659, 2-CA-098676. 2-CA-103384. 2-CA-103390, 2-CA-103430, 2-CA-103726, 2-CA-103771. 2-CA-105591, 2-CA-106094

Dear Mr. Kearney:

This letter follows up on our April 25, 2014 meeting with respect to the allegation that McDonald's USA, LLC ("McDonald's" or "Company") is a joint employer in the above­referenced unfair labor practice charges ("Charges") filed by the Fast Food Workers Committee. We appreciate the opportunity to supplement our previous submission to the Division of Advice ("'Division" or "Advice") and our various position statements submitted to the Region in these cases. 1

We address below the issues raised in our discussion on April 25th. While McDonald's serves its franchisees' interests by protecting the McDonald's brand and helping them run successful businesses. McDonald's does not in any way "share or codetermine those matters governing the essential terms and conditions of employment" of its franchisees' employees. TL!. Inc .. 271 NLRB 798 (1984), enfd 772 F.2d 894 (3d. Cir. 1985). Although we do not believe it is

for Advice to decide the joint employer question now and should instead direct the to nrn,r>Pc•rt

1 McDonald's previously submitted a statement to the Division on October 3. 2013, and submitted position statements to Region 2 on January 11, 2013, March 26. 2013, May 29. 2013, July 5, 2013. and July 25, 2013.

IS

Exhibit 4

May 22. 2014 Page 2

not a joint employer of its franchisees' employees for the reasons set forth herein and in our previous submissions.

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I. McDonald's Response to the SEIU's Corporate Campaign Is Not Indicative of a Joint Employer Relationship.

The SEIU and its affiliate organizations spent over $38 million last year on a corporate campaign targeting McDonald's and other quick-service restaurants.2 Neither the intent nor the result of this enormous spend was for the SEIU to obtain representation of the employees of any particular franchisee, much less the employees of the franchisees named in the various unfair labor practice charges you are reviewing. Instead, it was a massive public assault through coordinated media attacks, published campaign-funded studies, employee '·days of action," federal and state court litigation, and restaurant-level business disruptions. The target of this assault was not specific McDonald's-owned or franchisee-owned restaurant locations, but rather the McDonald's brand itself - indeed, the campaign made no effort to distinguish between McDonald's and its franchisees.

Obviously, this has not been a traditional organizing campaign by the SEIU and its locals. Despite over nineteen months of campaigning, there have been no representation petitions filed, no demands for recognition, no requests for neutrality, no 8(b )(7) actions, and no requests for a card check. It is a campaign that exists predominately, if not entirely, in the public sphere and seeks to disparage McDonald's as a brand. Media reports and campaign-funded studies attack the brand and provide anti-McDonald's rhetoric.3 Published videos from union-funded sources repeatedly target the brand alone.4 And coordinated "days of action" in various cities and at McDonald's headquarters also seek to publicly condemn the brand. 5 Other incidents, such as

2 This figure has been derived from an examination of 2013 LM-2 filings by the SEIU International and some of its key locals in New York, Chicago. Los Angeles, and Oakland. 3 See, e.g.. Employment Law Project, Super-Sizing Public Costs: How Low Wages at Top Fast-Food Chains Leave Tcn:payers Footing the Bill (October 2013); Sylvia Allegretto, et al., Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry (October 2013 )(with funding from fast Food Forward); Michele Simon, Clowning Around with Charity - Ho1v AkDonald ·s Exploits Philanthropy and Targels Children (October 20 l 3)(with support from Corporate Accountability International): Fast Food Forward, " "Report (\1ay

l UnitedNY The Center for

'A recent day of action occurred on May 15, when McDonald's was directly targeted by campaign protests at 142 restaurants in more than 55 cities throughout the United States. and internationally in approximately 2 I countries. In certain markets. McDonald's faced aggressive demonstration behavior including protesters paying with pennies at

May 22, 2014 Page 3

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protesting at McDonald's CEO Don Thompson's residence, attempting to disrupt a McDonald's shareholders meeting to deliver a petition, and interrupting a keynote speech by Jeff Stratton. McDonald's USA's President, are merely public spectacles, essentially street theater, directed entirely at the brand.

Indeed, just yesterday, on May 21, 2014, over 1,000 protestors stood adjacent to McDonald's worldwide corporate headquarters in Oak Brook, Illinois to protest the brand. Among those protestors was Mary Kay Henry, the SEIU International President, who succeeded in a public stunt of being arrested for defying local police instructions. These activities, viewed as a whole, clearly mark McDonald's as the "primary employer" subject to a coordinated campaign by the SEIU.

In light of this well-coordinated public attack on the brand, it is not at all surprising and entirely appropriate that McDonald's and its franchisees work together to publicly respond. Indeed, for over 58 years, McDonald's has driven its successful brand and customer loyalty by partnering with its hard working franchisees. McDonald's and its franchisees cultivate a uniform public image through a shared business model that includes, for example, the same core food products, the same design and color schemes for restaurant buildings, and the shared use of trade names and trademarks. McDonald's and its franchisees have long worked together and shared information in order to communicate effectively with the public. For example, both franchisee­mvned and McDonald's-o\\lned restaurants participate in cooperatives that determine the marketing and advertising initiatives in their respective markets throughout the country. This shared approach to presenting a unified public image to strengthen the brand existed well before the union corporate campaign and is standard in franchising relationships. 6

McDonald's sharing of information with its franchisees during the union corporate campaign to defend the brand against repeated public attacks has no bearing on the question of joint employment. McDonald"s actions are not related to ·'the essential terms and conditions of employment" of any franchisee's employees. See Yellow Cab Co., 208 NLRB 1020, 1021 (1974) (finding no joint employer relationship where none of the shared services such as advertising ··pertain[ ed] to the conduct of labor relations''). McDonald's did not and does not

. )

''··Typically, a franchisor imposes systemwide standards ... with regard to: advertising and promotion .... " Kevin M. Shelley & Susan H. Morton, .. Control" in Franchising and the Common Law. 19 Franchise L. J. 119. 121 (2000).

May 22, 2014 Page 4

require any franchisee to take any action with regard to its employees' wages, hours, or working conditions in response to the corporate campaign.

Indeed, McDonald's and its franchisees can communicate freely with their respective employees and the public in response to the union corporate campaign so long as, as to employees, these communications contain no threat of reprisal or force or promise of benefits. Under Section 8(c) of the Act, McDonald's expression "of any views, argument, or opinion, or the dissemination thereot: whether in written, printed, graphic, or visual form, shall not constitute or be evidence of an unfair labor practice ... if such expression contains no threat of reprisal or force or promise of benefit." McDonald's engaged in no communications that contained a threat of reprisal or force or promise of benefit. Nor did McDonald's direct its franchisees to do so. While McDonald's acknowledges the union's right to engage in a lawful corporate campaign publicly targeting the brand, McDonald's has the right to respond to this attack or Section 8(c) of the Act is meaningless.

At our April 25th meeting, the General Counsel inquired whether directions were given to a franchisee about who would be its spokespersons to the media in the event of a mass demonstration at its restaurant. The answer is no. McDonald's media guidelines were made available to franchisees, but the first page of those guidelines states, "[t]his communication is informational only and should not be construed as establishing requirements applicable to any Owner/Operator.., (See Exhibit A, at 17).

Recently, an unknown source provided the media with an April 17, 2014 email with several attachments - one of which contained McDonald's media guidelines - from McDonald's Vice President of U.S. Human Resources to McDonald's franchisees and McDonald's-owned restaurant personnel. See Wall Street Journal Online, McDonald's Prepares for Another Day of Protests, available at http://blogs.wsj.com/corporate-intelligence/2014/05/07 /mcdonalds­prepares-for-another-day-of-protest/ (as of May 22, 2014). The email notifies franchisees of two upcoming "days of action'' and attaches several documents: McDonald's general demonstration guidelines; notification of an optional legal hotline franchisees can use to contact a Littler Mendelson attorney; a ·'Restaurant Fun Toolkit" franchisees can use to recognize employees; and suggested talking points. (Exhibit A). There is nothing remotely unlawful in these documents and, most importantly for our purposes, nothing that touches on codetermination of wages, hours. or terms and conditions of employment for franchisees' employees. Furthermore, as with

to 1

Each of the attachments contains a clear reminder that the franchisee is entirely responsible for labor relations

May 22. 2014 Page 5

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The General Counsel also asked whether McDonald's made available to its franchisees corporate security in the event of mass demonstrations. The answer is yes, if a franchisee chose to use the security company engaged by McDonald's. Some have utilized McDonald's security services while some franchisees have hired their own security services. Given that McDonald's owns or leases the land and buildings where franchisee restaurants operate, the offer of security services merely evidences an owner's protection of its property interest. It has no bearing on the question of joint employment.

More specifically, making security available to franchisees is a far cry from the type of ·'direct and immediate'' control over labor relations that would justify a finding of joint employment under Board law. In re Airborne Express, 338 NLRB 597, 605 (2002). See Southern California Gas Co., 302 NLRB 456 (1991) (finding no joint employment relationship and stating, "the question of joint employer status must be decided upon the totality of the facts of the particular case."). Indeed, making security available to franchisees for demonstrations on McDonald's owned or leased property is not "labor strategy" and, even if a franchisee utilized corporate security, McDonald's had no ''direct and immediate" control over its franchisees' employees.

In summary, none of the actions taken by McDonald's to protect its globally known and recognized brand constitute codetermination of wage, hours, or other terms and conditions of employment for its franchisees' employees and do not evidence a joint employer relationship under existing, long-established Board law.

II. McDonald's Provides Various Optional Tools to Franchisees to Help Them Run a Successful Business, But Does Not Co-Determine the Terms and Conditions of Employment for Franchisees' Employees.

McDonald's, like other franchisors, offers various services and tools to its franchisees to assist them in developing their businesses. McDonald's is deeply committed to providing resources to help these small business owners provide good jobs and opportunities to their employees, and has a strong track record of doing so. McDonald's encourages its franchisees to use these resources, and most do, understanding that the resources benefit not only their individual businesses, but also the overall McDonald's brand. As the Board recognizes, ·'[a]

. )

are employers and make their own policies regarding employment-related matters. Owner/Operators may choose to use information from these materials that will be helpful to them in operating their own McDonald's restaurant(s). If you work for an Owner/Operator organization, please check with your Owner/Operator. or the person designated by your Owner/Operator. to determine whether and which of these materials apply to your organization.'"

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franchisor, wishing to attract franchisees and thus profit from [its] franchise system, may offer certain exclusive services of one kind or another to [its] franchisees. But, whatever business advantages may be offered to franchisees by franchisors in terms of services rendered to or on behalf of its franchisees, they cannot create the legal relationship of employer-employee as between employees of the franchisees and the management of the franchisor." Yellow Cab Co., 208 NLRB at 1022 (finding no joint employer relationship where none of the shared services such as advertising, training, and investigation of complaints against franchisees' employees ·'pertain[ ed] to the conduct of labor relations"). As we made clear in our previous submissions, the services and tools offered to each McDonald's franchisee are optional for the franchisee to use, or not use, in its discretion.8

And contrary to certain publicly-made assertions, McDonald's does not benefit if its franchisees reduce liabilities - including labor costs - on their balance sheets. As the franchise agreements provided to the Board made clear. McDonald's receives from each franchisee rent along with a monthly service fee that is based on a percentage of monthly gross sales at the franchisee's restaurant. (Franchise Agreement at iii! 7-8). Gross sales are not impacted by labor costs: concomitantly, neither is the service fee McDonald's receives each month. (Id. at if 7). Only the franchisee not McDonald's - has a financial incentive to manage its labor costs because, as in any other business, those costs impact the franchisee's profit. In short, McDonald's has no financial incentive to require any franchisee to use the tools and services it offers to reduce labor costs at the franchisee's restaurant.

McDonald's In-Store Processor Software and Other Optional Scheduling Tools Do Not Co-Determine the Terms and Conditions of Employment For Franchisees' Employees.

The vast majority of franchisees purchase an In-Store Processor ("ISP") from a vendor. The ISP comes equipped with proprietary software developed by McDonald's. While the ISP stores data that is used in managing various aspects of restaurant operations - including sales,

8 The General Counsel inquired at our April 25th meeting whether McDonald's believes that a joint employer finding is appropriate if a franchisor sets the wage rates of its franchisees' employees. Although we do not set the wage rates of our franchisees, we do not believe that the wage rates would make us a joint employer under current Board law. The Board has refused to find a even when one

former subcontractor were reasoned \Vere not despite facts demonstrating that the entity approved all of the subcontractor's new hires and annual

wage rate increases. Division of Advice Memorandum, RVT Maintenance and El Dia, Inc. rEDIJ (Nov. 26, 2002). But this question is purely academic as there is no evidence that McDonald's set the wage rates for franchisees' employees. In fact, it does not.

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customer counts. menu and price information, product mix information, inventory, waste, and product order information the ISP software can be (but is not required to be) used by franchisees to create employee schedules as well.

But McDonald's does not schedule franchisees' employees for work. Although the ISP software provides a schedule format, each franchisee has control over the key variables needed to create the schedule best suited to his/her restaurant, e.g., the number of employees, employee station ratings, and employee availability. Franchisees also can modify the schedule after it is generated, such as by adding or removing an employee from the schedule, changing the length of an employee's shift. changing the assigned station of the employee, or totally ignoring the schedule in its entirety. Because the franchisee is not required to use the scheduling software and, if it chooses to use it, controls the input and the output, McDonald's does not exert "direct and immediate" control over the work schedules for franchisee employees. Indeed, McDonald's is no more in control of co-determining its franchisees' employee's work schedule than, for example, Microsoft is responsible for co-determining the content of this submission because we used a Word program template to produce it.

The General Counsel expressed interest at our meeting in whether McDonald's provides a system to its franchisees that tracks labor costs as a percentage of sales at franchisee restaurants and, depending on the percentage, will prompt the user to reduce headcount. McDonald's does not direct its franchisees to reduce headcount. Rather, at the franchisee's discretion to generate it the ISP software can produce a report that displays labor costs as a percentage of sales over a given time period. The report does not display a direction to the franchisee to reduce headcount. Moreover, this report is for the franchisee's use and, again, is not used by McDonald's to direct a franchisee to reduce headcount. As with the decision to generate such a report, how to interpret the labor percentage displayed on the report is entirely within the discretion of the franchisee and its managers.

Of course, a franchisee's manager could determine that its restaurant would be best served by reducing headcount if he/she believes a high labor cost percentage is a symptom of overstaffing. but McDonald's does not require the manager to do so. It is equally possible that the manager -vvould reasonably believe that a high labor cost percentage is a symptom of low sales due to slow service, not having the right people in the right positions, or a myriad of other factors (internal and external) that could be remedied without reducing headcount. Thus, it is

a

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B. Exclusive Hiring Platforms Offered To Franchisees Do Not Support A Joint Employer Finding Because McDonald's Does Not Determine Who Its Franchisees Hire.

Likewise, franchisees have access to online hiring platforms, McState and Hiring to Win. Franchisees are not required to use either of these services. Mc State is a collection of websites and a hiring platform for which franchisees pay an annual fee to a third party to use. Prospective employees who seek to apply for a job at a McDonald's restaurant online can do so through Mc State if the franchisee is a subscriber. Each restaurant's homepage, which the franchisee can customize, identifies whether the restaurant is owned and operated by McDonald's or a franchisee. After the applicant selects whether he or she is applying for a crew or manager position at the restaurant, the applicant is invited to fill out and submit a job application online.

Hiring to Win likewise is an optional online hiring platform provided by a third party, Aon. In addition to the traditional application, it contains an employment assessment that is purportedly designed to identify hospitality-focused crew members and leadership-oriented managers. The employment assessments are conducted by Aon and Aon provides the results of the assessment directly to the franchisee, not to McDonald's. Hiring to Win is not mandatory for franchisees; approximately 10% of franchised restaurants in the United States do not subscribe to it. Subscriber restaurants pay Aon an annual fee per restaurant to participate.

Neither of these online hiring platforms provides a basis for a finding of joint employment. Both are optional services. Franchisees may use various other platforms at their disposal as well, including Monster.com and similar service providers. Most importantly, McDonald's does not require franchisees to hire or not hire any applicant who submits an application to the franchisee through McState or Hiring to Win or any other application, process, or platform. Not only is a franchisee not required to use any particular online hiring platform, but McDonald's does not control the decisions the franchisee makes with regard to its applicants if it does use them. Further, franchisees are free to use other methods for hiring, including accepting applications directly at the store locations.

Thus there is no basis to conclude that McDonald's exercises "direct and immediate control" over the hiring decisions for franchisees' employees simply because franchisees have the option to use (or not use) any given online hiring platform. Airborne Express, 338 NLRB at

NLRB at 1 certain one or

another to [its] But, whatever business advantages may be offered to franchisees by franchisors in terms of services rendered to or on behalf of its franchisees, they cannot create the legal relationship of employer-employee as between employees of the franchisees and the management of the franchisor.").

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McDonald's Optional WOW Orientation Also Does Not Support Joint Employer Status.

McDonald's also offers franchisees the option to purchase materials from a third party that can be used and/or customized to conduct an employee orientation called a WO\V orientation. McDonald's also offers its franchisees a standard orientation instruction manual, which encourages owner-operators to customize and personalize orientations. McDonald's does not require franchisees to use the WOW orientation. Whether a franchisee chooses to use or not use a WOW orientation is within the franchisee's complete discretion. McDonald's offer to assist the franchisee by providing instructions on how to conduct an effective orientation is not even arguably an exercise of direct and immediate control that justifies a joint-employer finding under current Board law. See S. G. Tilden. Inc., 172 NLRB 752, 753 (1968) ("The offer by [the franchisor] to train prospective employees of the franchisees was an offer to help by [the franchisor] and not the exercise of any authority over [the franchisees'] policies.")

D. Consulting Services Are Provided to Franchisees to Help Them Run a Successful Business, Not to Determine the Terms and Conditions of Employment for Franchisees' Employees.

McDonald's employs business consultants whose role is to consult with franchisees to help drive sales results. Such business consultants are common in franchise relationships and are not indicative ofjoint employer status. See, e.g., Courtlandv. GCEP-Surprise. LLC. No. CV-12-00349-PHX-GMS, 2013 BL 200819 (D. Ariz. July 29, 2013)(franchisor Buffalo Wild Wings employs franchise consultants assigned to franchisee restaurants, but no joint employment found); Kearney v. Kessler Family LLC, No. l l-CV-06016., 2011BL180795 (W.D.N.Y. July 11, 2011 )(franchisor employs Area Franchise Consultant, but no joint employment found). Business consultants do not have potential or actual "direct and immediate'' control over labor relations at franchisees' restaurants.

McDonald's business consultants' primarily are responsible for administering 'vkDonald's formal, interactive process the Restaurant Operations Improvement Process ('·ROIP'') - to assess franchisees' compliance with Quality, Service. and Cleanliness (QSC) standards and to \Nork with franchisees to assist them in complying with these standards. As a model franchisor entrusted with an iconic brand, McDonald's sets high expectations for

to

("SOR'") franchisee fails one of these visits, additional visits may be scheduled. If a franchisee does not improve sut1iciently after a failed visit, the restaurant at issue can be placed in the Improvement Process for Underperforming Restaurants ("IPUR'} The ultimate consequence of IPUR could be that the franchisee may not be eligible to obtain additional franchise restaurants or renew his

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current franchise agreement at the end of its term, or, in rare situations, a franchisee's agreement could be terminated. See Speedee 7-Eleven, 170 NLRB 1332, (1986) (right to terminate franchise agreement upon 30 days notice is not evidence of joint employer relationship).

Each FOR and SOR is scored to determine whether the franchisee passes or fails the visit. Although a '·People Review" is conducted during the FOR (and a shorter version of the '·People Review" is conducted during the SOR), unlike the other components it is not scored and thus does not determine the franchisee's eligibility for growth or re\\ITite. Further, the People Review makes clear on the first page that, ·'[a]s an independent Owner Operator, you are exclusively responsible for employment matters within your organization." A reminder at the bottom of every page states, .. [i]f you are an Owner Operator, you are exclusively responsible for complying with all applicable statutes, laws, and regulations applicable to your restaurant(s). You are also exclusively responsible for all employment related matters in your restaurant(s) and exercise complete control over the work, working conditions, and terms and conditions of employment for employees in your restaurants. The guidelines in this booklet with respect to employment related matters are informational only and should not be construed as establishing requirements applicable to any Owner Operator."

Buttressing these statements. the following guidance is provided to business consultants on the first page of the People Review:

To Business Consultants: ...

Owner Operators are independent employers \vho make their own decisions regarding employment related policies and procedures applicable to the employees who work in their restaurant(s). The People Review portion of the Operations Review is a consulting visit designed to help the O\\lner Operator maximize their investment in people. It is not intended to be used as a checklist or interview. nor is it intended to be an opportunity to tell the Owner Operator how to manage their employees or how to run their restaurant. ... You must never require or demand an Owner Operator to use a particular McDonald's policy or practice. You must always remember that any decision to change people policies or practices rests solely in an owner operated restaurant with the independent O\vner Operator . . . . [P]lease refrain from discussing or providing any advice of

issues and attorneys of the Owner Operator's own choosing and not from their Business Consultant.

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At our meeting on April 25th, the General Counsel inquired why business consultants ask franchisees if they are using Hiring to Win, WOW orientation, and other optional tools if those tools are not mandatory. The questions that address these topics on the People Review are not focused on whether the franchisee uses a particular tool (e.g., Hiring to Win, WOW orientation, etc.). but rather whether the franchisee has considered whether it has an effective people practice of that type in place (e.g., an effective hiring system. an effective orientation program, etc.). For example, the People Review seeks a yes or no response to the statement, "[t]he restaurant is using an effective hiring process (e.g .. Hiring to Win) to consistently select high-quality, guest­focused Crew, Crew Trainer, and Manager employees." Another question seeks a yes or no response to the statement, ''[t]he restaurant has a comprehensive and consistent Crew orientation process in place that is supported by follow up orientations (e.g., the National Crew WOW Orientation material)." The People Review is designed to make the owner-operator evaluate whether he/she can improve people practices that may drive business results. It is not used to co­determine what those practices will be.

McDonald's HR Consulting Hotline Does Not Advise or Direct Non­Management Employees of Franchisees.

Like most major U.S. companies, McDonald's operates an HR Consulting hotline. All McDonald's employees are provided the HR Consulting hotline number. Upon receiving a call, the HR Consultant who answers the hotline call requests the caller's employee ID to verify whether the caller is an employee of McDonald's or a franchisee. If the caller is a non­management employee of a franchisee, the HR Consultant is instructed to explain that McDonald's is not his/her employer and the caller should address the matter with the franchisee. McDonald's does not provide direction or advice to non-management employees of its franchisees.

At our meeting, the General Counsel inquired what McDonald's would do if a franchisee was engaging in obvious race discrimination. In addition, he asked whether McDonald's would remedy the violation. McDonald's is aware of situations where franchisees were alleged to have violated wage and hour laws and/or immigration laws. and McDonald's has neither investigated the allegations nor taken actions with regard to the franchisee's employees in response to the allegations. As the franchise agreement makes clear. franchisees themselves are responsible for complying with applicable laws. also are solely responsible for remedying violations of

at

Franchisees Can Subscribe.

As noted above in section Il(A), the vast majority of franchisees use an ISP - in essence the back ot1ice hard-drive of the restaurant that collects and stores the operational and sales data

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for the restaurant. The Regional Restaurant Data Diagnostic ("R2D2") is a data collection tool and reporting service. R2D2 sits on the ISP in order to compile ISP data and process it for use in creating specific reports about the restaurant's operations. which may help the franchisee reach its business objectives. A franchisee can choose to subscribe to R2D2 and pay an annual fee (around $125 per year, per restaurant), which allows the franchisee to select up to 40-50 reports of its choice to receive through R2D2.

At our April 25th meeting, the General Counsel inquired whether McDonald's has access to data gathered from the franchisee· s ISP and, if so, how it is used. McDonald's does indeed have access to reports and data formatted by R2D2, and for good reason. McDonald's needs access to sales data, customer counts, inventory, food costs, and similar information to evaluate the health of the franchisee's business and analyze such data in the aggregate on a market, regional, divisional, and national basis. As a franchisor whose business goal is to drive sales and a stronger brand. McDonald's has - and needs - access to operational information from its franchisees' restaurants for understandable and necessary business purposes.

As noted above, the ISP also contains information concerning employees and scheduling. Similarly, among the many reports R2D2 provides are reports concerning labor hours and labor costs at the restaurant over particular time periods. Because McDonald's has access to R2D2, it has access to these types of reports as well.

But implicit in the General Counsel's question is the notion that if McDonald's has access to such data, it therefore must use the data to co-determine hours and the scheduling of employees. That assumption is without basis and false. McDonald's does not use R2D2 data to codetermine schedules, hours, or any terms and conditions of employment for franchisees' employees. McDonald's leaves the determination of those employees' wages, hours, and working conditions to each franchise owner. Moreover, because McDonald's does not profit from reducing labor costs at its franchisees' restaurants, it has no financial incentive to use the data for this purpose.

McDonald's franchises roughly 3,000 approved franchisees in the United States - are successful business people from a wide variety of diverse backgrounds who have invested significant time, effort, and financial resources in establishing and building their businesses.

:\JkDonald's works side by side with these franchisees to create strong and to to rPCf'>Pi''f

owners restaurants. on day basis. There is no basis to conclude that because McDonald's has access to a broad range of operational information concerning a particular restaurant, including employee information. that it uses that information to direct a franchisee to set certain hours. wages, schedules, or staff complements, or otherwise control labor matters at that restaurant. Because the joint employer analysis focuses on the actual control the putative joint employer exercises over the employees of

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the primary employer, McDonald's mere access to franchisee's ISP data is insufficient to establish a joint employer relationship as a matter of established Board law. See AA;/ Property Holding Corp., 350 NLRB 998, 1000 (2007) ("In assessing whether a joint employer relationship exists, the Board does not rely merely on the existence of ... contractual provisions, but rather looks to the actual practice of the parties"); TLl Inc., 271 NLRB 798, 798-799 (1984) (employer's actual role in supervising and directing employees insufficient to establish joint employer relationship despite provision in lease agreement that employer would maintain --operational control, direction, and supervision" of employees).

G. McDonald's Provides Limited Direct Training to Management Emplovees oflts Franchisees.

The General Counsel requested that McDonald's provide further detail on what training it requires of its franchisees' employees. Pursuant to the franchise agreement, McDonald's requires that the franchise owner and at least one manager at every franchise restaurant be Hamburger University certified (although the franchise owner may be that restaurant manager if he owns only one restaurant). Further, McDonald's requires that each shift be staffed by a shift­certified manager that has completed food safety training.

Determining what training to provide its crew members and other non-management employees - including how to cook food in conformity with McDonald's standards, how to use restaurant systems such as the POS system, and how to serve customers - is solely within a franchisees' discretion. McDonald's has no authority to require franchisees' non-management employees to participate in training provided by McDonald's and does not do so.

This minimal amount of required management training - perfectly standard in the franchise context- does not support a joint employer finding. 9 Indeed, in a recent Advice Memorandum, the Division found that franchisees of SuperShuttle were independent contractors because, inter alia, the franchisor did not exercise "significant control over the manner and means of the [franchisees'] work," a degree of control test similar to that used in the joint employer analysis. Division of Advice Memorandum, SuperShuttle Los Angeles. Inc. (May 23, 2013 ). The Division concluded that SuperShuttle provided direct training to franchisees' employees:' but despite this finding, the Division held that the franchisees were not employees of SuperShuttle because they enjoyed "significant operational freedom". The same conclusion is

to

9··Typically. a franchisor imposes systemwide standards by means of the franchise agreement between the parties that establishes uniform specifications with regard to ... training requirements ... Shelley & Morton, supra note 6. at 121.

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III. McDonald's Lack of Control over Its Franchisees' Labor Relations Is Distinguishable from the Relationship in Browning-Ferris, Case No. 32-RC-109684, in Which the Board Has Invited Briefs on Whether to Revisit Its Current Joint Employer Standard.

On May 12, 2014, the Board issued a Notice and Invitation to File Briefs in Browning­Ferris Industries ofCal!fornia, Inc., DIB!A BF! Newby Island Recyclery and FPR-Jl, LLC, D!B/A Leadpoint Business Services and Sanitary Truck Drivers and Helpers Local 350. International Brotherhood of Teamsters, 32-RC-109684, a case in which the Board may revisit the current standard for a joint employer relationship. In that case, the Regional Director, applying the current Board standard, found no joint employer relationship between BFI and Leadpoint. A review of some of the key facts in that case demonstrates just how far removed the relationship between McDonald's and its franchisees is from any possible joint employer finding, even if the standard is revisited:

• Direct Control Over Wage Rates. The contractual agreement between Leadpoint and BFI provides that Leadpoint cannot raise its employees' wage rates in excess of the wages BFI pays for full-time employees who perform the same work without first obtaining BFI' s consent. This degree of control over wages is totally absent from McDonald's relationship with its franchisees. McDonald's has no control over the wages paid by its franchisees to its franchisees' employees.

• Direct Control Over Personnel Decisions. The staffing agreement in Browning-F erris provides that BFI "maintains the right to reject or discontinue the use of any Personnel." McDonald's, in contrast, has no authority to reject or terminate the employment of any franchisee employee or to require its franchisees to reject or terminate any employee, either.

• Direct Control Over Station Assignments and Emplovee Productivity. BFI maintains productivity standards for the lines that Leadpoint's employees operate. BFI employees, who are present at the facility, can start and stop the lines and alter their pace as they see fit. Aside from infrequent consulting visits, McDonald's business consultants are not physically present at franchisee restaurants on a day-to-day basis and, even when they are present from time to time, they have no authority to require

to start or work or the pace their work.

• BFI determines how many lines to run at facility and how many employees should man each line. McDonald's does not require franchisees to have a specific number of employees at specific stations. Those decisions remain with the franchisee.

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• Direct Control Over Overtime. BFI solely determines whether and how much overtime is needed for Leadpoint's employees. In contrast. McDonald's has no role in determining the amount of overtime worked by its franchisees' employees.

Despite finding each of these key facts in Browning-Ferris, the Regional Director of Region 32 concluded that BFI was not a joint employer of Leadpoint's employees. By requesting briefs on whether (and if so, how) the Board should revise the current standard for determining a joint employer relationship, the Board implicitly acknowledges that the Regional Director's decision in Browning-Ferris is correct under current Board law. If BFI is not a joint employer given each of the key facts above, McDonald's certainly is not. And because the Division provides legal advice based on Board law as it currently stands, the Division cannot find McDonald's to be a joint employer of its franchisees' employees here. See NLRB Rules and Regulations 201.2.1 ("The Associate General Counsel for Advice is responsible for legal research on and analysis of broad areas of labor law administration [and] for legal advice to Regional Directors on all unfair labor practice cases involving novel or difficult legal issues ... . "). Moreover, even if the Board in Browning-Ferris expands the standard for determining a joint employer relationship, the key factual differences discussed above establish that McDonald's would not be a joint employer of its franchisees' employees under any new standard suggested by the Browning-Ferris facts.

IV. Although McDonald's Is Not a Joint Employer with Its Franchisees, the Board Does Not Need to Decide the Joint-Employer Issue Now.

Currently, there are over 50 unfair labor practice charges pending in 11 different Regions that allege McDonald's is a joint employer of its franchisees' employees. We do not believe the Division must resolve the question of joint employment outright, but should instead direct the Regions to resolve unfair labor practice charges without proceeding to complaint on the question of joint employment. By not including joint employer allegations in complaints, meritorious unfair labor practice charges will either go to trial on the merits or, given the nature of many of the allegations. more likely be settled. If violations are found, individual franchisees are fully capable ofremedying those violations and are obligated to do so. Therefore, McDonald's is not needed to effectuate the purposes of the Act with respect to these matters. Further, in the event a petition is filed and a union is certified at a particular franchisee's restaurant, only the franchisee would bargain with the union over terms and conditions of employment because it is the

~0LU~,,0 to not McDonald's.

hand. and as we explained at our to of Advice. joint employer allegations in any complaint will force McDonald's to litigate each matter to conclusion because of the critical centrality of this issue to McDonald's business. Moreover. McDonald's will have to litigate every case because the joint employer analysis is highly fact-intensive and the key facts differ from franchised restaurant to franchised restaurant.

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See Grass Valley Grocery Outlet, 332 NLRB 1449 (2000) (explaining that evidence of a single­employer relationship between a franchisor and one franchisee does not indicate a single­employer relationship between the franchisor and any other franchisee); Southern California Gas Co., 302 NLRB 456 (1991) (finding no joint employment relationship and stating, ·'the question of joint employer status must be decided upon the totality of the facts of the particular case."); Cabot Corp., 223 NLRB 1388, 1388 (1976) (same).

We are hopeful that this supplemental submission, together with the information provided in our earlier submission to the Division of Advice and our position statements submitted to the Region, contain sufficient information for you to either direct the Regions not to proceed to complaint on the question ofjoint employment or rule explicitly that McDonald's is not a joint employer with its franchisees under the Act.

We will make ourselves available to meet with you again if open issues still remain and you believe we can be of further assistance. Please do not hesitate to contact me to discuss this information or any additional questions you may have.

Vf ry trul~'ol)fs, 1\ ~

V"--· 1~-·

Willis J. ldsmith

cc: Rob Liddle, Esq., McDonald's Corporation Doreen Davis, Esq., Jones Day Jonathan Linas, Esq., Jones Day