April 22, 2022
By: Thomas O’Connell
Citation:
Fast Food Workers Committee v. National Labor Relations Board, 31 F.4th 807 (D.C. Cir. 2022).
Executive Summary:
In this reported decision, Senior Circuit Judge Laurence Silberman of the United States Court of Appeals for the District of Columbia Circuit upheld the National Labor Relations Board’s (NLRB) approval of settlement agreements between McDonald’s, its franchisees, and the NLRB General Counsel. The case arose from unfair labor practice charges against McDonald’s franchisees, with the petitioners, the Fast Food Workers Committee and Service Employees International Union, seeking to establish McDonald’s as a “joint employer.” The court determined that the NLRB acted within its discretion in approving the settlements and found that the petitioners’ due process objections were not properly preserved for review.
Relevant Background:
The dispute originated from labor organizing efforts targeting McDonald’s franchisees. Petitioners alleged that various McDonald’s franchisees engaged in unfair labor practices under Section 8(a)(1) and 8(a)(3) of the National Labor Relations Act (NLRA), including threatening employees, promising benefits, surveilling union activity, and retaliating against workers through terminations and reduced hours.
The NLRB General Counsel initially pursued claims against McDonald’s and its franchisees, including a theory that McDonald’s could be held jointly liable as a “joint employer.” The cases were consolidated before an administrative law judge (ALJ), who scheduled hearings on the merits. However, in 2018, after a change in NLRB leadership, the General Counsel moved to settle the claims rather than litigate the joint employer issue.
The settlements required franchisees to provide full back pay to affected employees, contribute to a $250,000 Settlement Fund for potential future violations, and post remedial notices. The agreements did not include a determination that McDonald’s was a joint employer, but McDonald’s agreed to assist in enforcing compliance, including issuing notices if a franchisee failed to adhere to the terms.
The ALJ rejected the proposed settlements, expressing concern that they failed to resolve the joint employer issue. The ALJ also noted that the settlements did not provide sufficient deterrence against future violations and could allow McDonald’s to evade liability for its role in controlling franchisee labor policies.
On appeal, the NLRB, applying its discretionary authority, reversed the ALJ and approved the settlements. Board Member William Emanuel participated in the decision, despite petitioners’ request for his recusal. Petitioners argued that Emanuel had a conflict of interest due to his prior employment at a law firm that had represented McDonald’s in related labor matters. After consulting the Board’s Designated Agency Ethics Official, Emanuel declined to recuse himself, determining that he was not required to do so. The Board proceeded with issuing its final order approving the settlements.
Petitioners sought review before the D.C. Circuit, arguing that the settlements were inadequate and that Emanuel’s participation in the Board’s decision rendered it invalid due to bias and a conflict of interest.
Decision:
- The court upheld the NLRB’s decision to approve the settlements, finding that the Board acted within its discretion under Independent Stave Co., 287 NLRB 740 (1987), which provides the standard for evaluating settlements in unfair labor practice cases. The Board considered relevant factors, including the positions of the affected parties, the risks of litigation, and the adequacy of relief provided. The court noted that the Board’s role in settlement approvals is entitled to significant deference, citing Dupuy v. NLRB, 806 F.3d 556, 562 (D.C. Cir. 2015).
- The court found that the Board’s approval was reasonable despite the settlements not resolving the joint employer issue. It agreed with the NLRB’s reasoning that the absence of a joint employer finding did not undermine the settlements, as they provided full monetary relief and remedies to affected employees. The Board further noted that the joint employer question was the subject of an ongoing rulemaking process, making a determination in this case less critical. The court acknowledged that the Board has broad discretion to decide when and how to resolve unsettled legal questions through adjudication or rulemaking, citing NLRB v. United Food & Commercial Workers Union, 484 U.S. 112, 126 (1987).
- The court determined that the settlements provided sufficient relief under the NLRA, as employees who suffered lost wages due to franchisee actions received 100% back pay plus interest, and discharged employees received additional compensation for waiving reinstatement rights. The Board noted that these remedies exceeded those in Independent Stave, where a settlement providing only 10% back pay was approved.
- The court considered and rejected petitioners’ argument that the Board’s approval was arbitrary and capricious. The petitioners argued that the settlements failed to provide sufficient deterrence against future violations and should have required McDonald’s to admit joint employer status. The court found that the Board properly exercised its discretion in assessing whether the settlements adequately addressed labor law violations and that there was no requirement that the settlements impose additional liability beyond what was necessary to remedy the alleged unfair labor practices.
- The court rejected petitioners’ due process claim regarding Board Member Emanuel’s participation, holding that petitioners failed to properly raise a constitutional due process challenge before the NLRB. Under Detroit Edison Co. v. NLRB, 440 U.S. 301, 311 n.10 (1979), a party must preserve an argument before the agency to seek judicial review. The court emphasized that a general claim of unfairness does not constitute a due process challenge and that no “extraordinary circumstances” excused petitioners’ failure to preserve the issue.
- The court dismissed additional objections to the settlements’ notice requirements, including the argument that electronic posting should have been mandated. The Board determined that the evidence did not show franchisees “customarily” used electronic communications for employee notifications, referencing J. Picini Flooring, 356 NLRB 11, 13 (2010). The court found this reasoning reasonable and within the Board’s discretion.
- The court acknowledged the NLRB’s policy favoring settlement of labor disputes over prolonged litigation, citing Wallace Corp. v. NLRB, 323 U.S. 248, 253–54 (1944). It agreed that the settlements provided immediate relief and ensured compliance mechanisms, which outweighed the speculative benefits of continued litigation.
Looking Forward:
This decision reinforces the NLRB’s broad discretion in approving settlements and highlights the evolving nature of joint employer liability. While the Board declined to rule on the joint employer issue here, future cases may be influenced by ongoing rulemaking and shifting NLRB policies.
- For franchisors, the ruling underscores the importance of maintaining clear franchise structures to minimize joint employer risk. It also demonstrates that the NLRB may prioritize settlements over prolonged litigation, particularly when leadership changes impact enforcement priorities.
Moving forward, franchisors should monitor regulatory changes and assess whether settlements provide a pragmatic resolution to labor disputes while mitigating long-term risks.