McDonald’s trial gives peek at chain’s inner workings

A pivotal trial against McDonald's that began this week is providing a peek into the inner workings of the maker of the Big Mac.

The trial centers over whether McDonald's exerts control over hiring and pay decisions for employees at restaurants run by its U.S. franchises. The National Labor Relations Board contends the company does, and should be considered a "joint employer" along with franchisees.

Such a finding would be historic because it would make McDonald's liable for the labor practices at its more than 14,000 domestic restaurants -- 90 percent of which are franchised.  And it could open a path to unionization for workers by giving labor groups a centralized target in McDonald's Corp., rather than a patchwork of more than 3,000 franchisees.

The trial stems from cases filed around the country on behalf of workers who said they were subject to retaliation or other unfair labor practices for taking part in protests and strikes as part of their campaign for an hourly wage of $15, as well as for union representation. The push is being backed by the Service Employees International Union, and has made low wages a hot political issue.

It's expected to be a protracted legal fight, with appeals likely from the losing side in court. Here are some insights into McDonald's from the opening statements this week in New York:

"HIRING TO WIN"

McDonald's Corp. has an internal program called "Hiring to Win" that grades job applicants as "green," "yellow" or "red." The program was one of many examples cited by Jamie Rucker, a lawyer for the labor board, as evidence of the control that McDonald's exerts over labor decisions at franchised restaurants. Joseph Hirsch, a lawyer for McDonald's franchisees in Philadelphia, said franchisees suffer no consequences whether they use the program or not.

"20 to 25 SECONDS"

McDonald's has a manual describing the various tasks that need to be handled in restaurants, and details the speed with which they should be performed, Rucker said. Taking a customer's order, for instance, is supposed take 20 to 25 seconds.

Lawyers for franchisees said setting such standards is part of the franchising model.

Richard Brody, a lawyer for New York franchisees, said McDonald's needs to protect its image and deliver on the expectations people have when they walk into one of its restaurants. He asked the court to imagine ordering a Big Mac that came with no "special sauce."

"McDonald's protects that brand like the mother bear protects her cub," Brody said.

OPERATIONS CONSULTANTS

McDonald's uses "operations consultants" to continuously monitor franchisees, Rucker said. And he said franchisees can't ignore what they say, since the company has the power to terminate their franchise agreements.

William Goldsmith, a lawyer for McDonald's Corp., said it's possible that the board might find a couple operations consultants who did or said something that "crossed the lines between advice and direction."

But Goldsmith said that was expected given the size of the organization, and that such transgressions do not amount to McDonald's controlling franchisees.

SOFTWARE AND FORMS

An employee's hours are determined by a dynamic shift scheduling program, Rucker said. Such programs are intended to tell managers the optimal number of people they should have working based on sales.

Lawyers for McDonald's and its franchisees said the software is optional. They noted that such programs don't take into account factors such as whether there is a local parade or nearby construction. As such, franchisees can ignore whatever the software recommends and do what they think is best.

As for various forms provided by McDonald's, one franchisee lawyer compared it to borrowing a book from a library. He said franchisees use McDonald's materials because they're free and come from a reliable source, rather than having to pay another party for the help.

McPAY

Rucker said McDonald's offers a toolkit designed to help franchisees determine wages to stay competitive. In one case, he said McDonald's told a franchisee to bring down the wages for its employees because they could be "disruptive" to nearby McDonald's.

Lawyers for franchisees said their clients determine pay for their workers, and one cited an example of a franchisee creating his own wage rates and personnel forms.

Louis DiLorenzo, a lawyer for franchisees in Chicago and Indianapolis, also cited an example where one of his clients decided to go against McDonald's custom of cross-training employees to perform different tasks throughout the restaurant. Instead, he said the franchisee trained employees to perform a specific role and stick to it.

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