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October 3, 2014Client Alert

The Beat Goes On: Unions Ramp Up Pressure on Minimum Wage

The campaign carried out by a coalition of unions and community groups against fast-food companies and retailers demanding an increase in the Federal minimum wage to $15-per hour and the right to organize without retaliation shows no signs of letting up. The latest round of massive nationwide strikes was held on September 4 at fast-food restaurants in more than 100 cities, including Detroit, Atlanta, Miami, Houston, Milwaukee, Minneapolis, Chicago, New York, Los Angeles, Hartford, Boston, and Philadelphia.

For this recent round of protests, the organizers promoted and encouraged protesters to employ Civil disobedience tactics and recruited home-care workers to become a visible part of the protests, with the stated intent of expanding the campaign into a broader movement. Largely because of this new approach, dozens of fast-food workers were arrested during these strikes, including 10 people taken into custody in Los Angeles, 11 in San Diego, 19 in New York, 42 in Detroit, 23 in Chicago, 10 in Las Vegas, and 11 in Little Rock, Arkansas.

In spite of these strikes, the large fast-food companies have not raised their minimum wages, and have not voluntarily recognized any union. However, the protesters have scored several high-profile victories in this campaign. 9 states and the District of Columbia have enacted minimum wage increases so far, and 38 other states have considered minimum wage bills during the 2014 session. Additionally, some major urban markets like Milwaukee, Chicago, Seattle, San Diego, San Francisco, and Oakland have either raised their minimum wage or are currently discussing doing so. The Los Angeles Unified School District raised its minimum wage to $15 per hour, and the Los Angeles City Council voted to increase the minimum wage for hotel workers within the city to $15.37 per hour by next year, in spite of the fact that a study that it itself commissioned showed that City hotels had already seen a sharp decline in employment relative to hotels in Los Angeles County overall.

The organizers of the campaign are counting on long-term gains, and know that both the Obama Administration and the current configuration of the NLRB has created a perfect storm of conditions favorable to the organizers’ interests and objectives. Besides asking Congress to raise the national minimum wage to $10.10 an hour, President Obama recently referenced the fast food strikes during a Labor Day speech in Milwaukee and said that, if he had a service-sector job, and “wanted an honest day’s pay for an honest day’s work, [he would] join a union.” This statement expressly confirms the White House’s agenda for raising the minimum wage and encouraging unionization.

More importantly, on February 12 the President signed Executive Order 13658, to raise the minimum wage to $10.10 for individuals working on new federal service contracts. On September 19, the Department of Labor’s Wage and Hour Division submitted its Final Rule implementing this Executive Order to the White House Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA). The Final Rule mandating the $10.10 minimum wage answers some of the questions that contractors have had since Executive Order 13658 was issued. Once it is published, it will apply to federal contractors who receive new contracts on or after January 1, 2015, or who have services covered by the Service Contract Act, or concessions and services in connection with federal property or lands.

For its part, the NLRB continues to make the conditions more favorable for the unionization of fast-food and retail employers. On July 29, 2014, the Office of the General Counsel of the NLRB issued a notice stating that a franchisor could be held jointly liable for its franchise operators’ labor and wage violations. This notice would broaden the definition of a “joint employer” from that which had been applied by the NLRB in recent years and threatens to disrupt longtime business and employment practices maintained by restaurants and retailers that rely on a franchising model. On July 22, the NLRB made it easier for unions to organize the smallest group of employees that could gain them a majority of supporters by issuing a decision affirming a "micro-unit" consisting of a small, discrete subset of retail employees. More decisions of this sort would enable unions to strategically control the composition of a bargaining unit, which is a critical factor in a union’s ability to prevail in an election.

In light of these developments, which are particularly unwelcome news for employers in the retail industry and franchisors, all employers should be more proactive and put themselves in the best possible position to deal with these developments. Some specific steps they could take include reviewing their system manuals, to ensure that the franchisor is not exercising excessive control over the daily operations of its franchisees; avoiding any involvement in the franchisee’s direct employment practices, including recruitment, firing, payroll issues or the review of employment records; ensuring that contracts and franchise agreements specify that subcontractors and franchisees make all employment-related decisions; and requiring subcontractors and franchisees to comply with all relevant labor and employment laws.

Because both the White House and the NLRB seem intent on fostering conditions that would make employers, particularly franchisees, more vulnerable to strikes and campaigns by labor groups, and more vulnerable to unionization efforts, our clients are encouraged to monitor this issue carefully.

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