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Franchise Workers Win Victory Over U.S. Effort to Curb Lawsuits

A federal judge has struck down key portions of a Trump administration rule that made it more difficult for workers to win lawsuits against companies over violations committed by contractors and franchisees.

The rule, which the Labor Department proposed last year and made final in January, raised the bar for employees of a franchise like Burger King or Subway to win a judgment against the parent company if the restaurant violated minimum-wage or overtime laws.

Because the contractors and franchisees that directly employ workers often have limited resources, suing the larger companies is often the best hope for workers seeking to recover wages they are owed.

In a decision on Tuesday in U.S. District Court in Manhattan, Judge Gregory H. Woods largely sided with the more than 15 states that challenged the rule. He said the Labor Department had departed from the statute governing minimum-wage and overtime rules without adequate justification, rendering the rule arbitrary and capricious.

Judge Woods also said the department had failed to “make more than a perfunctory attempt” to consider the costs of the new rule to workers. All told, he wrote, the new approach to liability for parent companies was “flawed in just about every respect.”

A Labor Department spokeswoman said that the decision was disappointing and that the department would review its legal options.

David Weil, who oversaw enforcement of wage and hour laws during the Obama administration, said that he expected the department to appeal the case, but that an appeals court would almost certainly not rule before the presidential election.

The Labor Department “cannot wish away our basic workplace law,” said Mr. Weil, who is now dean of the Heller School for Social Policy and Management at Brandeis University. “The slapdash nature of the department’s rule was vividly demonstrated by Judge Woods’s scathing opinion.”

Under the Obama administration’s approach, a broad set of circumstances could make a parent company a so-called joint employer, meaning that it has liability for violations committed by a contractor or franchisee. Those circumstances include anything from direct control of workers to simply providing facilities and equipment that the workers use.

But the Trump Labor Department required evidence of control to render the parent company liable as a joint employer. Under its rule, a company like Burger King could typically be held liable for violations only if it hired and fired employees of the franchisee, if it supervised them and dictated their schedules, if it set their pay, or if it oversaw their employment records.

Judge Woods said those criteria were “impermissibly narrow,” though he did leave intact a separate portion of the rule that doesn’t typically apply to employment relationships mediated through contractors and franchisees.

The National Labor Relations Board in February authorized a similar rule, which made it harder for employees of contractors and franchisees to win lawsuits against parent companies over violations of other aspects of labor rights, like firing workers who try to unionize.

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Uber and Lyft Consider Franchise-Like Model in California

OAKLAND, Calif. — Uber and Lyft, which are facing mounting pressure to classify their freelance drivers as employees in California, are looking for another way.

One option that both companies are seriously discussing is licensing their brands to operators of vehicle fleets in California, according to three people with knowledge of the plans. The change would resemble an independently operated franchise, allowing Uber and Lyft to keep an arms-length association with drivers so that the companies would not need to employ them and pay their benefits.

The idea would effectively be a return to the days of how groups of black cars were run. Lyft has presented the plan to its board of directors, one person said. Uber, which already works with fleet operators in Germany and Spain, is also familiar with the business model.

The companies have not committed to the franchise-like plans, said the people with knowledge of the discussions, who asked to remain anonymous because the details are confidential. Uber and Lyft are waiting to see how California’s legal situation around drivers, who have been treated as independent contractors, plays out first, they said.

Matt Kallman, an Uber spokesman, said the work on establishing fleets was “exploratory” and that the company was “not sure whether a fleet model would ultimately be viable in California.”

A Lyft spokeswoman, Julie Wood, said the company had looked at alternative models but favored an approach where drivers “remain independent and can work whenever they want while also receiving additional health care benefits and an earnings guarantee.”

The ride-hailing giants are considering how to retool their businesses as they grapple with a new California law, Assembly Bill 5, which could upend their services. The law, which was designed to grant employment benefits to gig workers, could force Uber and Lyft to categorize drivers as employees if it was shown that the drivers’ jobs were part of the companies’ core business, among other criteria.

Although the law went into effect in January, Uber and Lyft have not complied with it, arguing that they are simply tech platforms and are not transportation businesses. In May, California sued Uber and Lyft to enforce the new law.

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Credit…Mario Tama/Getty Images

Their clash with the state is set to come to a head this week. This month, a San Francisco Superior Court judge ordered the companies to employ their drivers by Thursday. Executives at Uber and Lyft, who have argued that they cannot meet that deadline, have appealed the decision and warned that they would be forced to shut down their services as soon as Friday if the order was not reversed.

“If our efforts here are not successful, it would force us to suspend operations in California,” John Zimmer, Lyft’s president, said in an earnings call last week. California accounts for about 16 percent of Lyft’s business, he said.

Dara Khosrowshahi, Uber’s chief executive, also said last week in an MSNBC interview that the company’s ride-hailing services in California would stop, at least temporarily, if the order was not changed.

“It’s a fork-in-the-road situation,” said Dan Ives, a managing director at Wedbush Securities who tracks the ride-hailing industry. “These are some of the tough decisions they need to make to save their business model.”

Uber and Lyft, which are based in San Francisco, have long considered their drivers to be contractors. That means that drivers are responsible for their own vehicle and maintenance costs and that Uber and Lyft do not pay for overtime, unemployment insurance or other expenses.

The companies have argued that this freelance model allows drivers to drive only when they want to. But critics have said it places unreasonable financial burdens on drivers and gives Uber and Lyft unfair advantages over businesses that follow employment laws.

Uber and Lyft have strenuously objected to A.B. 5 and have been fighting its reach. The companies have poured tens of millions of dollars into a ballot measure that would exempt them from the state law. Uber has also made changes to its product, such as showing fares to drivers upfront and allowing them to decline rides without facing penalties, to reinforce their status as independent contractors.

But behind the scenes, officials at Uber and Lyft also began discussing just-in-case options for their California businesses last year, the people with knowledge of the plans said.

At Uber, many of the proposed ideas were code-named with the names of characters from the Mario Bros. video game, like Luigi, the people said. The Washington Post reported earlier on Project Luigi, which included the changes to Uber’s app that give drivers more control over fares.

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Credit…Jim Wilson/The New York Times

Another option that policy teams at both of the companies floated was the franchise-like model, the people with knowledge of the plans said.

Under the proposal, Uber and Lyft would invite other businesses to establish ride-hailing fleets using their platforms. That could bolster the companies’ claims that they were simply tech companies that built sophisticated dispatch services and that providing transportation was outside their core business, protecting them from A.B. 5’s requirements.

At Uber, the effort drew inspiration from the company’s operations in Germany and Spain, where transportation rules have already forced it to work with fleets, Mr. Kallman said.

Lyft based its plan on FedEx, which franchises some of its delivery routes to local operators, current and former employees said.

Uber and Lyft employees said the companies did not collaborate or share information about their plans with each other.

A franchise-like business can be challenging. Working with a fleet operator could increase costs because it introduces a third party who needs to be paid, potentially forcing Uber and Lyft to raise fares or reduce their service fees, current and former employees said. The companies would also likely have to surrender some control over driver behavior, leaving them more vulnerable to reputational damage if a driver harassed a passenger or a car was dirty.

Another hurdle is that few fleet operators in California are large enough to absorb Uber’s and Lyft’s business, partly because Uber and Lyft previously disrupted taxis, black cars and similar operations.

For now, the companies have staked their primary hopes on the ballot measure that would exempt them from A.B. 5, employees and financial analysts said. The initiative, Proposition 22, proposes minimum-wage standards and limited health benefits for drivers. It will appear on California’s ballot in November.

Whatever changes Uber and Lyft make to their businesses to comply with A.B. 5 will ultimately be expensive, said Mr. Ives of Wedbush Securities. He estimated that it would cost Uber $500 million a year and Lyft $200 million a year. Both companies are already unprofitable and have lost much of their ridership during the coronavirus pandemic.

“This legislation could really be a backbreaker,” Mr. Ives said.

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McDonald’s Details What Dining In Will Look Like

Clean the digital kiosks each time a customer orders. Place “closed” signs on certain tables to promote social-distancing. Scrub the bathrooms every half-hour.

Those were among the instructions in a 59-page guide that McDonald’s recently distributed to franchisees outlining procedures for safely reopening the fast-food chain’s dining rooms across the country.

The guide — titled “The Dine-In Reopening Playbook” — does not outline a strict timeline, giving franchisees some discretion to decide when to reopen, according to a copy reviewed by The New York Times.

Once a local government says that restaurants can admit dine-in guests, a McDonald’s official in that region will decide whether reopening can begin, it says. Then individual franchise owners will make a decision about whether to go through with reopening.

So far, fewer than 100 McDonald’s locations have opened dining rooms in the states where that is already allowed. A McDonald’s spokesman, Jesse Lewin, said the company and its franchisees had been discussing reopening plans “for the last several weeks.” The company worked with epidemiologists as well as state and local health officials to assemble the guidelines, he said.

In addition to the rules about kiosks and bathrooms, the guide calls for all “high-touch” areas to be disinfected every 30 minutes and recommends putting signage on the floor to prevent customers from brushing past one another as they move around.

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Credit…Sarah Blesener for The New York Times

The details of the guide were earlier reported by The Wall Street Journal.

Unlike the small, independent restaurants that have been battered during the pandemic, McDonald’s was in a good position to weather the economic fallout. Its drive-throughs have stayed open, and they accounted for about two-thirds of the company’s revenue before the crisis.

But the company’s bottom line has still taken a hit. After reporting a decline in sales last month, the company’s chief executive, Chris Kempczinski, warned that “the exact trajectory of our recovery is highly uncertain.”

And workers and labor advocates have criticized the company for failing to provide sufficient protective equipment to employees working at the drive-throughs.

In the reopening guide, McDonald’s said it would require employees to have their temperatures taken before work, wear gloves and face masks, and wash their hands every hour.

“For dine-in orders, the bag will be placed on a clean sanitized tray and delivered to the customer while maintaining social-distance requirements,” the guide says. “Do not forget napkins and straws!”

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Credit…Erika P. Rodriguez for The New York Times

Virtually every restaurant owner in the United States — from Michelin-star chefs to fast-food executives — has been wrestling with how to make dining rooms safe in the coronavirus era. Some owners are planning to install plexiglass barriers between booths, while others are turning to paper menus and disposable cutlery.

McDonald’s is not the only fast-food chain moving closer to reopening. Restaurant Brands International, the parent company of Burger King and Popeyes, said this week that it would begin reopening dining rooms with a number of new safety precautions, including “beautiful tabletop signage” to indicate which tables are open.

The McDonald’s guide also includes a Q. and A. section on how to manage guests who refuse to comply with social-distancing guidelines.

“Always approach a situation calmly and treat everyone with respect,” the guide says. “Inform the guest: I apologize for any inconvenience, but to help keep everyone safe, we would like all our guests to maintain a safe distance of six feet from each other and our staff.”

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Credit…Gabriela Bhaskar for The New York Times

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Drive-Throughs Are Now a Lifeline for Fast-Food Chains

For decades, the fast-food drive-through has been a greasy symbol of Americana, a roadside ritual for millions of travelers with a hankering for burgers and fries.

Now, the drive-through, with its brightly-colored signage and ketchup-stained paper bags, has taken on a new importance in the age of social distancing.

Over the last month and a half, the coronavirus pandemic has forced small, independent restaurants to close and Michelin star chefs to experiment with takeout. But despite the chaos, the nation’s drive-throughs have continued to churn out orders, providing a financial reprieve for chains like McDonald’s and Burger King even as fast-food workers have become increasingly concerned about the threat of infection.

While restaurant dining rooms sit empty, many people have started treating drive-throughs like grocery stores, making only occasional trips but placing larger orders. Popeyes has introduced “family bundles” to capitalize on the demand for bigger meals. Taco Bell is offering a promotion — free Doritos Locos Tacos on Tuesdays — that has increased traffic at some of its drive-throughs, overwhelming employees. And dine-in chains like Texas Roadhouse have converted empty parking lots into temporary drive-through lanes.

“For many restaurants, it’s an absolute savior,” said Jonathan Maze, the executive editor of Restaurant Business Magazine.

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Credit…Tag Christof for The New York Times
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Credit…Tag Christof for The New York Times

At many chains, including McDonald’s, the drive-through accounted for as much as 70 percent of revenue before the crisis, generating billions of dollars for the industry every month. During the pandemic, sales have mostly held steady. In March, drive-throughs generated $8.3 billion across the fast-food industry, an increase from $8 billion in sales over the same period in 2019, according to data from the NPD Group, a market research firm.

But while it has shielded fast-food companies from the worst economic effects of the pandemic, the drive-through has become a dangerous place for some low-wage workers, who cook and serve food in cramped conditions, often without access to protective equipment. In a number of states, workers at McDonald’s and other chains have staged walkouts and called for increased safety precautions.

Like other businesses that have remained open, drive-throughs are often tinged with fear. Some customers roll down their windows just far enough to stick out a pair of tongs. Others arrive armed with Lysol spray and plastic wrap.

“They’re just as scared of us as we are of them,” said Jamila Allen, 23, who works at a Freddy’s in North Carolina. An effort by McDonald’s locations in Los Angeles to lighten the mood of the workers with a calendar of ostensibly morale-boosting events like Crazy Sock Day was widely ridiculed as tone-deaf.

And despite repeated assurances from the major fast-food chains that gloves and face masks are on the way, anxious (and often mask-less) employees working at drive-throughs struggle to maintain social distance, even with fewer workers on each shift.

“It’s impossible to keep six feet apart in the workplace and definitely impossible to stay that far away from customers,” said Terrence Wise, 40, a shift manager at a McDonald’s in Kansas City, Mo. “If you’re taking a customer’s money and they cough or sneeze, you’re on alert and on edge.”

The Fight for $15 campaign, which works with fast-food employees to advocate a higher minimum wage, has identified dozens of McDonald’s workers in at least 14 states who have tested positive for the coronavirus. David Tovar, a McDonald’s spokesman, said the company has taken a range of steps to protect its work force, including putting up barriers and allowing employees to use trays to slide cash and food back and forth. “Customers can lift it off the tray themselves, so there’s no contact between the employee and the customer,” Mr. Tovar said.

Of all its rivals in the fast-food and casual dining business, McDonald’s was arguably in the best position to weather the pandemic. Over the last year, the company has spent hundreds of millions of dollars on its drive-throughs, installing digital menu boards that prod customers to place larger, more expensive orders. At some locations, McDonald’s has experimented with cameras that recognize license-plate numbers, allowing the company to tailor a list of suggested purchases from a customer’s previous orders.

During the pandemic, McDonald’s has made a handful of lower-tech adjustments, simplifying its menu to make lines move faster by cutting all-day breakfast and using only one type of lettuce. “The less choices you have for your crew to make, the more efficient and fast they can be,” Mr. Tovar said.

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Credit…Tag Christof for The New York Times
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Credit…Tag Christof for The New York Times

Taco Bell has also changed how it runs its drive-throughs. In the past, the company mostly filled relatively small orders. Now, customers are buying much larger meals — enough food to put leftovers in the refrigerator, according to Mike Grams, the chain’s chief operating officer.

“They’re locked up in their house, and so when they come out, and they go to a drive-through, they want to buy more,” Mr. Grams said.

To accommodate those new ordering habits, the company has moved its drive-through workers from the window to the now-vacant dine-in area, opening up space for cooks to assemble larger, more complicated orders in the kitchen.

But not every major chain has been able to come up with pandemic workarounds. Even before the coronavirus, chains like Ruby Tuesday and TGI Fridays, with large dining rooms designed for leisurely meals, had been struggling, closing locations as once-loyal patrons defected to faster, trendier options like Chipotle.

Without drive-throughs, these kinds of dine-in restaurants — many of which have taken on significant debt since the 2008 financial crisis — may struggle.

“We’ll see some large dining chains go under,” said Aaron Allen, a restaurant consultant. “It’ll finally be the death knell for them.”

Over the next year, food critics and industry experts say, the closures of large dine-in chains, mom-and-pop restaurants and fine-dining establishments could transform the restaurant industry, creating a more uniform, less vibrant landscape. The pandemic has exposed the gulf between the haves and have-nots, accelerating the demise of beloved but cash-strapped restaurants as the major fast-food chains continue to bring in revenue. Historically, recessions have benefited chains like McDonald’s and Burger King, which typically see higher sales when people are cutting back on spending.

Still, the pandemic has caused plenty of financial pain even for companies whose drive-throughs are humming. The chief executive of McDonald’s, Chris Kempczinski, has taken a 50 percent pay cut. After reporting a decline in sales on Thursday, Mr. Kempczinski warned that “the exact trajectory of our recovery is highly uncertain.”

And individual franchisees may also struggle, especially in the short term. In April, the National Owners Association — an advocacy group that represents some McDonald’s franchisees — clashed with the company over rent payments and other issues.

Over all, however, the corporate muscle of the big fast-food companies puts franchisees in an enviable position compared to most small businesses, especially independent restaurants. At Burger King and Popeyes, individual store owners have gotten help from corporate “franchisee liquidity teams” in applying for the loans under the government’s small-business relief program.

A provision in that program also allowed big chains like Shake Shack to secure loans, even as smaller restaurants with less experience handling complicated paperwork missed out on funds.

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Credit…Tag Christof for The New York Times
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Credit…Tag Christof for The New York Times

After it was criticized by lawmakers and restaurateurs, Shake Shack returned the $10 million loan it had gotten through the program. One reason the chain needed that money in the first place: It does not have any drive-throughs. In the next few years, industry experts say, more dine-in chains like Texas Roadhouse may begin experimenting with the format, given how necessary it has been during the coronavirus shutdown.

Ultimately, the pandemic could provide “a moment of redemption” for drive-throughs, said Adam Chandler, the author of “Drive-Thru Dreams,” a history of fast food.

Since it emerged in the 1950s, the format has faced criticism from public health officials and urban beautification campaigns, prompting cities like Minneapolis to ban the construction of new drive-throughs.

These days, however, the experience of ordering a burger from behind the steering wheel feels more like a reasonable safety precaution than a cold transaction.

And to some, it also feels refreshingly normal.

“It speaks to something that is extremely unremarkable,” Mr. Chandler said. “That you can do that at a time of enormous upheaval is meaningful. It’s poignant in this really chaotic moment.”

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Big-Name Hotels Go Empty and Smaller Owners Are Hurt

It all started to fall apart for Vinay Patel about a week ago.The occupancy rates at the nine hotels he owns in the Northern Virginia area plummeted from about 50 percent to only a handful of rooms each night because of the coronavirus pandemic. He scrambled to cut costs. Floors …

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Franchise Workers Lose Some Power to Challenge Labor Practices

The National Labor Relations Board announced a new regulation on Tuesday that makes it harder to challenge companies over their labor practices, potentially affecting the rights of millions of workers.

The rule, which will take effect on April 27, scales back the responsibility of companies like McDonald’s for labor-law violations by their franchisees, such as firing workers in retaliation for attempts to unionize. The rule also applies to workers employed through contractors like staffing agencies or cleaning services.

That is a reversal of the doctrine that the board adopted late in the Obama administration, which had made it possible to deem a much wider range of parent companies to be so-called joint employers.

“This final rule gives our joint-employer standard the clarity, stability and predictability that is essential to any successful labor-management relationship and vital to our national economy,” John F. Ring, the board’s chairman, said in a statement.

The Obama-era standard, established in 2015, said a parent company could be considered a joint employer of workers at a franchisee or contractor even if it controlled those employees only indirectly. For example, a company could be a joint employer if it required franchisees to use software that imposed certain scheduling practices. The parent company could also be considered a joint employer if it had a right to control the franchisee’s employees even if it hadn’t exercised that right.

Under the new rule, the parent company will share liability for violations committed by contractors or franchisees only if the parent has substantial, direct and immediate control over the other companies’ employees — including their pay, benefits, hours, hiring, firing or supervision.

In the case of fast-food franchises, the parent company would probably have to directly determine scheduling practices, and perhaps other working conditions, to be considered a joint employer.

The new rule could also make it more difficult for employees of contractors and franchisees to unionize. A parent company that chooses to shut down a franchise when employees of that franchise are seeking to unionize is likely to face legal risk only if it is deemed a joint employer. Workers and union officials have sometimes accused parent companies of this tactic, though the companies and industry associations have denied that this happens.

A parent company that is considered a joint employer typically must also bargain with workers at a franchisee or contractor if they form a union, a requirement that the new rule will help many parent companies avoid.

In explaining the rationale for the new rule, the agency said in a statement that it sought to return to the joint-employer doctrine that prevailed for decades before 2015, except “with the greater precision, clarity and detail that rule-making allows.”

But the new rule could make it even less likely for companies to be deemed joint employers than before 2015 because it adds the word “substantial” to the words “direct and immediate” in describing the form of control that determines that status.

In January, the Labor Department announced a similar rule effectively making it more difficult to hold parent companies liable for minimum wage and overtime violations committed by franchisees.

The labor board, which gained a Republican majority in 2017, first sought to reverse the Obama-era standard in a ruling late that year. But the board voted to vacate that ruling after its inspector general found that a Republican board member had a potential conflict of interest and should not have taken part.

After that reversal, the board took a new tack. Instead of trying to change the Obama-era standard by deciding cases involving specific employees and employers, it decided to issue a regulation that would apply to all employees and employers in these kinds of work arrangements.

Philip A. Miscimarra, who was the board’s chairman during its first effort to reverse the Obama-era policy in 2017 and left soon after, said that it was appropriate for the agency to address the issue through a new regulation. “The board clearly has statutory authority to adopt regulations, and rule-making can provide more certainty in this important area for employees, unions and employers,” Mr. Miscimarra said in an email.

Critics of the board, however, argued that the agency was doing whatever it could to achieve a desired policy outcome.

“After getting caught violating ethics rules the first time, Republicans on the board are now ignoring these rules and barreling towards reaching the same anti-worker outcome another way,” Senator Elizabeth Warren, the Massachusetts Democrat who is running for president, said in a statement when the board proposed its new rule in September 2018.

Wilma B. Liebman, who served as chairwoman under President Barack Obama, said pro-worker groups were likely to challenge the new rule in court. She said they could argue that the “blatant effort to evade the same conflict of interest problem” that plagued the initial attempt to reverse the Obama-era approach could also undermine the new rule.

The board member who the inspector general said had a potential conflict in the adjudication, William J. Emanuel, also had a role in proposing the rule. Mr. Emanuel’s former law firm had represented a party in the case that led the Obama labor board to hand down its joint-employer ruling in 2015.

Ms. Liebman said opponents could also argue that the board had not seriously considered alternatives and objections, something required by law, and noted that the new rule defied a federal appeals court decision largely upholding the Obama-era doctrine.

The board rejected such allegations in material it included with the new rule, citing court precedent that it said made clear that Mr. Emanuel did not have to recuse himself, and saying it had revised its initial proposal in response to the nearly 29,000 public comments. “Throughout this rule-making process, the board has been willing to reconsider the preliminary views expressed,” the agency said.

Michael J. Lotito, a lawyer who represents employers at the firm Littler Mendelson, said the board had devised the rule with an eye toward accommodating the appeals court decision by allowing indirect control of workers to be a factor in determining joint employment, just not one that could trigger the status on its own. But Ms. Liebman questioned whether courts would accept that argument.

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New Rule Makes It Harder to Challenge Labor Practices

The National Labor Relations Board announced a new regulation on Tuesday that makes it harder to challenge companies over their labor practices, potentially affecting the rights of millions of workers.

The rule, which will take effect on April 27, scales back the responsibility of companies like McDonald’s for labor-law violations by their franchisees, such as firing workers in retaliation for attempts to unionize. The rule also applies to workers employed through contractors like staffing agencies or cleaning services.

That is a reversal of the doctrine that the board adopted late in the Obama administration, which had made it possible to deem a much wider range of parent companies to be so-called joint employers.

“This final rule gives our joint-employer standard the clarity, stability and predictability that is essential to any successful labor-management relationship and vital to our national economy,” John F. Ring, the board’s chairman, said in a statement.

The Obama-era standard, established in 2015, said a parent company could be considered a joint employer of workers at a franchisee or contractor even if it controlled those employees only indirectly. For example, a company could be a joint employer if it required franchisees to use software that imposed certain scheduling practices. The parent company could also be considered a joint employer if it had a right to control the franchisee’s employees even if it hadn’t exercised that right.

Under the new rule, the parent company will share liability for violations committed by contractors or franchisees only if the parent has substantial, direct and immediate control over the other companies’ employees — including their pay, benefits, hours, hiring, firing or supervision.

In the case of fast-food franchises, the parent company would probably have to directly determine scheduling practices, and perhaps other working conditions, to be considered a joint employer.

The new rule could also make it more difficult for employees of contractors and franchisees to unionize. A parent company that chooses to shut down a franchise when employees of that franchise are seeking to unionize is likely to face legal risk only if it is deemed a joint employer. Workers and union officials have sometimes accused parent companies of this tactic, though the companies and industry associations have denied that this happens.

A parent company that is considered a joint employer typically must also bargain with workers at a franchisee or contractor if they form a union, a requirement that the new rule will help many parent companies avoid.

In explaining the rationale for the new rule, the agency said in a statement that it sought to return to the joint-employer doctrine that prevailed for decades before 2015, except “with the greater precision, clarity and detail that rule-making allows.”

But the new rule could make it even less likely for companies to be deemed joint employers than before 2015 because it adds the word “substantial” to the words “direct and immediate” in describing the form of control that determines that status.

In January, the Labor Department announced a similar rule effectively making it more difficult to hold parent companies liable for minimum wage and overtime violations committed by franchisees.

The labor board, which gained a Republican majority in 2017, first sought to reverse the Obama-era standard in a ruling late that year. But the board voted to vacate that ruling after its inspector general found that a Republican board member had a potential conflict of interest and should not have taken part.

After that reversal, the board took a new tack. Instead of trying to change the Obama-era standard by deciding cases involving specific employees and employers, it decided to issue a regulation that would apply to all employees and employers in these kinds of work arrangements.

Philip A. Miscimarra, who was the board’s chairman during its first effort to reverse the Obama-era policy in 2017 and left soon after, said that it was appropriate for the agency to address the issue through a new regulation. “The board clearly has statutory authority to adopt regulations, and rule-making can provide more certainty in this important area for employees, unions and employers,” Mr. Miscimarra said in an email.

Critics of the board, however, argued that the agency was doing whatever it could to achieve a desired policy outcome.

“After getting caught violating ethics rules the first time, Republicans on the board are now ignoring these rules and barreling towards reaching the same anti-worker outcome another way,” Senator Elizabeth Warren, the Massachusetts Democrat who is running for president, said in a statement when the board proposed its new rule in September 2018.

Wilma B. Liebman, who served as chairwoman under President Barack Obama, said pro-worker groups were likely to challenge the new rule in court. She said they could argue that the “blatant effort to evade the same conflict of interest problem” that plagued the initial attempt to reverse the Obama-era approach could also undermine the new rule.

The board member who the inspector general said had a potential conflict in the adjudication, William J. Emanuel, also had a role in proposing the rule. Mr. Emanuel’s former law firm had represented a party in the case that led the Obama labor board to hand down its joint-employer ruling in 2015.

Ms. Liebman said opponents could also argue that the board had not seriously considered alternatives and objections, something required by law, and noted that the new rule defied a federal appeals court decision largely upholding the Obama-era doctrine.

The board rejected such allegations in material it included with the new rule, citing court precedent that it said made clear that Mr. Emanuel did not have to recuse himself, and saying it had revised its initial proposal in response to the nearly 29,000 public comments. “Throughout this rule-making process, the board has been willing to reconsider the preliminary views expressed,” the agency said.

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A 7-Eleven in Japan Might Close for a Day. Yes, That’s a Big Deal.

HIGASHI-OSAKA, Japan — Mitoshi Matsumoto, the most famous 7-Eleven convenience store owner in Japan, wants to do something unthinkable in his 24-hour, 7-day-a-week industry: Take a day off.

That’s why, he says, 7-Eleven is trying to put him out of business.

Mr. Matsumoto announced in November his plans to close up shop so he and his two full-time employees could take off New Year’s Day, Japan’s most important holiday, after years of working 14-hour days with few breaks. But on Dec. 20, 7-Eleven’s parent company told him that his store had received more customer complaints than any other in Japan. He had 10 days to address the issues, it said, or the location would be closed.

“They don’t want to let me take New Year’s off. That’s all there is to it,” said Mr. Matsumoto, 57, who has made a name for himself in Japan by publicly defying the company’s demands that franchisees stay open 24 hours. “If they allow me to do this, others will start rising up here and there.”

His decision in February to shorten store hours inspired other franchisees to demand that 7-Eleven allow them to do the same. But the company has been slow to change, he said, so he decided to take New Year’s off in protest.

The standoff has supercharged a national debate over the business practices of the country’s 24-hour convenience store industry. Japan’s declining population has made workers harder to find. Tales of punishing work schedules have struck a chord in a country that holds a sometimes lethal corporate devotion to working long hours.

Last year, the labor ministry approved 246 claims related to hospitalization or death from overwork, according to government statistics, which show the retail industry as one of the biggest sources of complaints. Another 568 workers took their own lives over job-related exhaustion.

But even as convenience store owners are suffering under increasingly long hours, the country’s three biggest convenience store chains — 7-Eleven, Lawson and FamilyMart — have been reluctant to change the 24-hour schedule that Japanese shoppers have come to expect.

In a letter to Mr. Matsumoto, 7-Eleven said it received 78 complaints about his store this year. In a statement, it said that the threat to sever the contract was based on the complaints and on the “destruction of the relationship of trust” caused by his criticisms on social media of 7-Eleven’s management.

Mr. Matsumoto and his supporters say 7-Eleven is trying to make an example of the man who has become the face of the resistance against a company that they say exploits their labor.

“Owners can’t organize, because the second you try, they home in on you and apply pressure,” said Reiji Kamakura, the leader of the Convenience Store Union, a small group that has struggled to gain members and change industry practices in the face of corporate opposition.

Though it got its start in Texas in the 1920s, 7-Eleven has been controlled by a Japanese company since 1991. Today, it operates nearly 40 percent of Japan’s more than 55,000 convenience stores.

That makes 7-Eleven an integral part of Japanese life. The government considers convenience stores part of the country’s infrastructure, like highways and sewers. They are expected to help promote regional tourism and to help with local policing by offering a safe place for people to flee to. Its stores can be called on to help distribute aid and supplies during a natural disaster.

The vast majority of Japanese 7-Elevens are owned by individuals like Mr. Matsumoto. The company provides them with a storefront and access to a logistics network that keeps its shelves full of rice balls, cigarettes and boxed lunches. It sets operating procedures with an eye toward protecting the brand and providing a uniform customer experience.

Among those demands, it tells franchisees to keep their stores open 24 hours a day, seven days a week, 365 days a year.

The model, pioneered by 7-Eleven, worked well enough for years. But about a decade ago, it began to break down.

Hungry for growth, 7-Eleven and its competitors began a war of attrition, flooding the country with more locations in an attempt to steal market share. Each new shop cut into its neighbors’ profits.

At the same time, Japan’s labor pool was shrinking, driving up hourly wages and making it difficult to find reliable workers. Many franchisees — who are responsible for paying their staff’s wages — were forced to work more of their own shifts.

For 7-Eleven, the cost of opening new stores was minimal. But for many franchisees, the numbers no longer added up.

Mr. Matsumoto, a former carpenter, opened his store in 2012, hoping to earn a more stable income. From the beginning, he said, he locked horns with the corporate management, refusing to follow suggestions from his regional manager about how much food to order or what items to stock.

In May 2018, his wife, who had also worked at the store, died. He began having trouble finding reliable staff. In desperation, he asked his son to come home from college to help.

Even so, Mr. Matsumoto was working 12-hour shifts. And sometimes much more.

Then, one day in February, he told 7-Eleven he was going to shorten his store’s hours from 6 a.m. to 1 a.m.

The company said that would violate his contract. He would lose his store and the tens of thousands of dollars he had invested in it. On top of that, he was told, he would have to pay the company a penalty of about $155,000 for breach of contract.

Mr. Matsumoto did it anyway. When the company threatened to close his store, he went to the news media.

Activists had tried to draw national attention to the plight of convenience store owners for years. But something about Mr. Matsumoto’s story touched a nerve. Japanese reporters descended on the store. Letters of support and phone calls poured in from convenience store owners around the country, he said.

Mr. Matsumoto admits he has received his fair share of customer complaints. He has sparred with people who he says left their cars for too long in the store’s small parking lot. He closed the bathroom to the public — a move virtually unheard-of in service-friendly Japan — because customers were not keeping it clean and sometimes locked themselves inside for hours. But in the past, he said, 7-Eleven’s regional staff worked with him to resolve the issues.

That wasn’t the case this time, he said. When he asked to see the complaints against him, he said, the company showed him only a few, saying there were too many to give him a complete accounting.

In its statement, 7-Eleven said that it had “repeatedly explained to the owner the actions that were in violation of his contract,” adding that he had yet to take action to correct them.

He suspects his activism played a part in the complaints. After his story went viral, people began to attack him on Twitter, accusing him of smearing the company’s image. His store has 270 reviews on Google Maps, many attacking his character. Virtually all of them were written after he appeared in the news.

Speaking privately, some 7-Eleven owners and employees say they admire Mr. Matsumoto, but few are willing to put their own shops on the line.

Nevertheless, the public outcry has given them some hope that the industry will change. Major chains have pledged to introduce some reforms. 7-Eleven has said it will experiment with allowing a few shops to reduce their hours. It pledged to give this New Year’s Day off to employees at 50 locations it operates directly.

Mr. Matsumoto hopes that franchised stores will close, too, in an expression of solidarity.

He met with representatives from the company on Sunday, but the two sides were not able to come to a satisfactory agreement, he said. Mr. Matsumoto said that if 7-Eleven went through with its threat, he planned to go to court.

The current system cannot survive much longer, he said, but 7-Eleven will not change unless the owners force it to. So far, no one has come forward.

“If we don’t take a stand now,” he said, “there’s no future.”

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NYT > Business