Regulator Names McDonald's a 'Joint Employer' The National Labor Relations Board has deemed McDonald's a 'joint employer' – a decision that could redefine franchising as we know it.

By Kate Taylor

Opinions expressed by Entrepreneur contributors are their own.

Updated Wednesday, July 30 at 10:15 a.m. ET

Franchisors may now be held liable for employees' wages, working conditions and more.

The National Labor Relations Board (NLRB) has decided that McDonald's can be considered a "joint employer" for all workers – including those at franchise-owned restaurants.

McDonald's was notified of the board's decision on Tuesday, the Associated Press first reported. The NLRB confirmed in a statement on Wednesday that McDonald's will be named as a joint employer in 43 board-authorized cases involving the franchisor, if parties are unable to reach settlement.

McDonald's has vowed to fight the decision. "McDonald's does not direct or co-determine the hiring, termination, wages, hours, or any other essential terms and conditions of employment of our franchisees' employees – which are the well-established criteria governing the definition of a 'joint employer,'" Heather Smedstand, McDonald's senior vice president of human relations said in a statement.

The decision will likely have far-reaching repercussions throughout the franchise industry.

Traditionally, franchisees have exercised control over employment issues such as hiring, firing and determining pay rates, benefits and schedules. Meanwhile, franchisors stay out of day-to-day operations, focusing on brand standards, training and advertising.

Related: Franchisees Take 7-Eleven to Court for Alleged Racial Discrimination

By maintaining that employment issues are purely franchisee concerns, franchisors – especially fast-food chains, like McDonald's – have dodged criticism and lawsuits over minimum wage and employment practices. Now that McDonald's is considered a joint employer, the burger chain and other franchisors could be on the hook for those responsibilities.

Labor activists have championed the shift, arguing that if franchisors are deemed joint employers, they will be forced to take system-wide action on issues such as minimum wage instead of pushing the issue onto franchisees. Meanwhile, franchise groups, such as the International Franchise Association, have claimed that the shift will reduce franchisees' independence and raise costs for franchisors.

McDonald's plans to challenge the NLRB's decision, according to the report. "This is such a radical departure that it should be a concern to business men and women across the country," Heather Smedstad, senior VP of human resources at McDonald's, told the Associated Press.

The majority of McDonald's stores in the U.S. and beyond are run by franchisees. In 2013, McDonald's had more than 35,400 restaurants operating worldwide, 80 percent of which are franchised.

For better or for worse, the franchising industry has some huge changes on the horizon, at McDonald's and beyond.

Related: New McDonald's Lawsuit Could Redefine Franchising as We Know It

Kate Taylor

Reporter

Kate Taylor is a reporter at Business Insider. She was previously a reporter at Entrepreneur. Get in touch with tips and feedback on Twitter at @Kate_H_Taylor. 

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Business News

Zillow Predicts These 10 Places Will Have the Hottest Housing Markets in 2025

Zillow predicted that the hottest housing market of 2025 will be Buffalo, New York. Here's why.

Business Ideas

70 Small Business Ideas to Start in 2025

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2025.

Science & Technology

5 AI Books Top Entrepreneurs Are Reading in a Rush for 2025

Entrepreneurs must embrace AI or risk falling behind. Discover 2025's top 5 AI books to gain a competitive edge, featuring insights from "The Wolf is at the Door" and a free AI Success Kit.

Growing a Business

AI Adoption Doesn't Have to Be Daunting Anymore — Here's How to Choose the Right AI Tools For Your Small Business

As 2025 begins, AI adoption may still feel daunting for many business owners — but it doesn't have to be. Here's how to pick the best AI tools for your needs and integrate them wisely into your existing systems.

Growing a Business

Want to Build a Digital Business? Here's the Framework You Need to Succeed.

The article emphasizes how ISO 20000-1 serves as a strategic tool for entrepreneurs to structure entirely digital businesses.

Marketing

Why 2025 Will Be the Year AI Redefines Content Creation and Search Strategies

Artificial intelligence and machine learning are transforming the SEO landscape, requiring professionals to adapt their keyword strategies, content creation and user engagement techniques in response to revolutionary tools like ChatGPT.