Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Ill.: NLRB entitled to documents on McDonald’s franchisee relationships, (Jan 22, 2016)

By Greg Hammond, J.D.

The National Labor Relations Board (NLRB) is entitled to information concerning the relationship between McDonald’s and certain franchises, along with information regarding the franchises’ hiring processes, policies, and training policies, the federal district court in Chicago has decided. The court granted the NLRB’s application for an order requiring obedience with the subpoenas, finding that the subpoenas relate to the NLRB’s investigation of labor violation charges and are sufficiently limited in terms of scope and time periods for the information sought (National Labor Relations Board v. K. Mark Enterprises, LLC, January 20, 2016, Der-Yeghiayan, S.).

The NLRB filed suit against McDonald’s USA, LLC and certain franchises, alleging unfair labor practices. The franchises, however, have allegedly failed to comply with the NLRB’s subpoenas, which seek information concerning: (1) the relationship between the franchises and McDonald’s; (2) the franchises’ hiring processes, policies, training policies, employee handbooks, manuals, rules and policies, wages, benefits, promotions, transfers, scheduling, staffing, work assignments, and work hours; (3) the methods used by McDonald’s to review the franchises’ locations; and (4) the activities by McDonald’s and the franchises in response to the campaigns conducted by the defendants. The NLRB consequently requested an order requiring obedience to the subpoenas.

Definite terms, relation to investigation. The court first concluded that the NLRB has shown that the information sought is sufficiently delineated in the subpoenas and the NLRB has further adequately limited the scope of information sought and the period in question to three-years. In addition, the NLRB has shown that the requested information relates to the investigation of labor violation charges, including that the franchises obstructed union-related activities, the court found. Such an investigation is directly within the NLRB’s statutory authority concerning the prevention of unfair labor practices. Lastly, the NLRB demonstrated that the allegations that McDonald’s is the joint employer of the franchises’ employees are directly relevant to the NLRB’s investigation.

Relevancy of information sought. The franchises argued that the information sought in the subpoenas was not reasonably relevant to the allegations of an unlawful labor practice or to the allegations of joint employer status. The court rejected these arguments, however, finding: (1) there has been no showing that the NLRB acted outside its statutory authority in issuing the subpoenas and the fact that the information sought is relevant to the labor violation investigation is not the fault of the NLRB; (2) the franchises’ subjective belief that the requested production is “akin” to discovery is not a legitimate basis to excuse compliance; and (3) the information sought would relate to issues such as the authority to hire or fire employees, the work rules and conditions of employment, the supervision of employees’ day-to-day activities, McDonald’s ultimate control over the operations of the franchises, and no solicitation rules, which is information the NLRB necessarily needs in order to properly address its joint employer allegations.

The cases are Nos. 1:15-cv-09353, 1:15-cv-09421, 1:15-cv-09427, 1:15-cv-09502, and 1:15-cv-09563.

Attorneys: Kevin Mark McCormick for the National Labor Relations Board. Patrick V. Melfi (Bond Schoeneck & King, PLLC) for K. Mark Enterprises, LLC, Lofton & Lofton Management V, Inc., and RMC Enterprises, LLC.

Companies: Karavites Restaurants 11102, LLC; K. Mark Enterprises, LLC; Lofton & Lofton Management V, Inc.; RMC Enterprises, LLC; V. Orviedo, Inc.

Cases: FranchisingDistribution IllinoisNews