UNITED STATES OF AMERICA BEFORE THE NATIONAL ... - Politico

UNITED STATES OF AMERICA BEFORE THE NATIONAL LABOR RELATIONS BOARD ADMINISTRATIVE LAW JUDGE LAUREN ESPOSITO

McDONALD’S USA, LLC, A JOINT EMPLOYER, et al. and FAST FOOD WORKERS COMMITTEE AND SERVICE EMPLOYEES INTERNATIONAL UNION, CTW, CLC, et al.

Cases 02-CA-093893, et al. 04-CA-125567, et al. 13-CA-106490, et al. 20-CA-132103, et al. 25-CA-114819, et al. 31-CA-127447, et al.

GENERAL COUNSEL’S OPPOSITION TO McDONALD’S USA, LLC’S MOTION TO PRECLUDE ANY FUTURE CONTINUANCES In what is now a recurring theme, McDonald’s USA, LLC again (1) insists the National Labor Relations Board (“NLRB” or “Board”), the Administrative Law Judge assigned to hear this matter (“Judge Esposito,” “ALJ Esposito,” or “the ALJ”), and the General Counsel should all operate without the benefit of relevant information and (2) attempts to evade its responsibility for delaying this proceeding. As it did when it asked the Board to rule that all future conferences on every topic should be transcribed, McDonald’s asks Your Honor to rule that all future continuance requests be denied without considering the surrounding relevant context. Since future conferences might benefit from the freedom of expression permitted by lack of an official record, e.g. settlement conferences, while others might address such minor logistical matters that the cost of transcription would be unwarranted, decreeing that all conferences be recorded would be unwise. Not surprisingly, therefore, the Board declined to grant McDonald’s request for such a ruling. (Lewis Foods of 42nd Street, LLC, et al., Case Nos. 02-CA-093893, et al. (Apr. 21, 2015).)

Similarly, McDonald’s’ current motion asks this Court to rule on continuance requests yet to be made without benefit of the bases for such requests.

The Court should therefore decline

McDonald’s invitation to artificially limit its discretion under Section 102.43 of the Board’s Rules and Regulations to continue or adjourn this matter as appropriate. McDonald’s not only insists on rulings in the absence of relevant and necessary context, it also wants this trial to proceed without the evidence relevant to whether it is responsible for the unfair labor practices alleged to have occurred across the country: 

McDonald’s has petitioned to have the subpoena issued to it (“Subpoena”) revoked: that petition was denied its entirety. (McDonald’s USA, LLC’s Exhibits (“McD Exh.”) 9 and 11.)



McDonald’s has redacted and withheld evidence ruled to be relevant, continues to so withhold such evidence, and has refused an order of the ALJ to cease doing so. (G.C. Exhs. 1.10.2, 1.10.7, and 1.10.8.) Indeed, while the General Counsel was still keeping track of the scope of McDonald’s’ impermissible redaction, that extended to roughly 640 such documents comprising over 18,000 pages, with some documents containing little more than headings, e.g., Bates MCDNLRB026910, a spreadsheet containing roughly 2100 wholly redacted, i.e. blank, pages.1



McDonald’s has withheld the identities of the custodians of relevant evidence, (compare letter from J. Rucker to W. Goldsmith (Mar. 27, 2015), attached hereto as Exhibit 1, to McD Exh. 6 (letter from W. Goldsmith to J. Rucker (Mar. 29, 2015)); compare letter

1

In the light of such statistics, McDonald’s’ claim that it has produced more than 100,000 pages of documents looks much less significant and is plainly a bad measure of either (i) the extent to which it has complied with the Subpoena or (ii) the amount of evidence it has provided the General Counsel.

from J. Rucker to W. Goldsmith (Apr. 1, 2015) with letter from W. Goldsmith to J. Rucker (Apr. 6, 2015), attached hereto as Exhibits 2–3). 

After General Counsel identified a number of custodians of relevant documents, especially Operations/Business Consultants dealing with the Respondent Franchisees in this matter, McDonald’s refused to produce relevant documents in the possession of those individuals and advised Your Honor it would refuse any order that it do so. (Transcript at 319:15, 309:23–310:1, 315:15–319:23, and 347:5–18.)



McDonald’s has refused to produce reports showing the extent to which it monitors and evaluates its franchisees’ staffing levels and job assignments, claiming it does not possess such reports, even though it produces those for its franchisees on a regular basis. (See letter from W. Goldsmith to B. Kearney (May 22, 2014), attached hereto as Exhibit 4, at p. 12; see also Tr. at 355:9–356:17.)



Although documents regarding its admitted coordinated response to the fast food campaign should be readily available to and producible by McDonald’s in response to paragraphs 109–110, 112–113, and 115–118 of the Subpoena, McDonald’s has, more than eight months after receiving the Subpoena, failed to produce a single page it designates as responsive to any of those paragraphs.



McDonald’s has not come close to completing its response to the Subpoena on any of the dates ordered: not on the original Subpoena return date of March 30th, not on the adjourned date of May 26th, not on the ordered date for completion of its productions from its unilaterally-designated initial group of custodians by June 2nd, and not on the adjourned trial date of October 5th.

In light of its behavior—and despite its claim to be “stunn[ed]”—it should be plain to McDonald’s why the General Counsel claims it is responsible for the fact that hearing has not resumed in this matter.2 The inescapable fact is that McDonald’s is responsible. Finally, it is time to put to rest McDonald’s’ repeated, incorrect assertion “that the Board does not allow for pre-trial discovery.” (McDonald’s’ Motion at p. 2.) It is true that the Board’s processes do not require that parties be granted the full panoply of discovery procedures available in private civil litigation. N.L.R.B. v. Washington Heights–West Harlem–Inwood Mental Health Council, Inc., 897 F.2d 1238, 1245 (2d Cir. 1990) (holding that petitioner was not denied due process when it was denied access to the Board’s investigative files because, inter alia, pre-trial discovery in Board proceedings “is neither constitutionally nor statutorily required”) (emphasis added); December 12, Inc., 282 NLRB 475, 475 n.1 (1986) (respondent not denied due process when it was not allowed depositions because “[t]he Board does not allow the taking of depositions to provide discovery in ordinary circumstances”) (emphasis added), enfd. 838 F.2d 474 (9th Cir. 1988) (table); Flite Chief Inc., 258 NLRB 1124 (1981), affd. 696 F.2d 1003 (9th Cir. 1982). However, Administrative Law Judges routinely postpone hearings (with Board approval) to provide parties an opportunity to review documents produced pursuant to subpoena or accommodate subpoena enforcement actions, Kentucky River Medical Center, 352 NLRB 194, 199 (2008) (hearing adjourned 39 days to allow respondent to subpoena witnesses and documents for presentation of its case), enfd. 557 F.3d 301 (6th Cir. 2009); Operating Engineers Local 825 (Building Contractors), 272 NLRB 186, 189 n.3 (1984) (hearing adjourned 2

McDonald’s’ attempt to attribute the delay in resuming hearing to the time it took for General Counsel to file enforcement papers is a particular brand of chutzpah. In essence, McDonald’s complains that the General Counsel is taking too long to force it to behave. It is entirely within McDonald’s’ control to remove that impediment to resumption of trial; it need only fulfill its obligations under the Subpoena rather than waste time making impermissible redactions and filing frivolous motions.

to allow General Counsel to inspect and summarize subpoenaed documents); Arlington Ridge Dev. Co., 203 NLRB 787, 787 (1973) (hearing adjourned to permit General Counsel to review certain subpoenaed documents); Dravo Corp., 248 NLRB 620, 621 (1980) (General Counsel request for adjournment to review voluminous subpoenaed documents granted), review denied 673 F.2d 1299 (3d Cir. 1981); 833 Central Owners Corp., 359 NLRB No. 66, slip op. at 3, n.6 (2013) (adjourning hearing to allow General Counsel to review subpoenaed documents), vacated by NLRB v. Noel Canning, — U.S. —, 134 S.Ct. 2550 (2014); Pacific Maritime Ass’n, 184 NLRB 312, 314 (1970) (indefinite adjournment granted to permit General Counsel to conduct subpoena enforcement proceedings), enfd. 452 F.2d 8 (9th Cir. 1971); Playboy Club of New York, Inc. (Hotel & Restaurant Employees, Local Joint Executive Bd., 173 NLRB 783, 789 (1968) (hearing adjourned for several months to obtain enforcement of subpoenas); John S. Barnes Corp., 88 NLRB 871, 872 (1950) (delay of nearly a year while subpoena enforcement proceedings were ongoing; “It is plain that the principal reason for delay in the disposition of this case was the Employer's unsuccessful attempt to defeat the processes of the Board”). In short, McDonald’s has submitted a request for a ruling on a hypothetical question which it has surrounded with its attempt at public relations and its misstatement of the facts. McDonald’s’ latest motion should be denied; this Court should take note of Respondent’s misuse of the Board’s processes. Dated: New York, New York October 14, 2015 ___/s/ Jamie Rucker ______________________ Jamie Rucker, Counsel for the General Counsel

GENERAL COUNSEL’S OPPOSITION McDONALD’S USA, LLC’S MOTION TO PRECLUDE ANY FUTURE CONTINUANCES I, the undersigned employee of the National Labor Relations Board, being duly sworn, depose and say that on October 14, 2015 I electronically filed the above-entitled document(s) with the Division of Judges for the National Labor Relations Board and served the above-entitled document(s) upon counsel for the parties by electronic mail at the following addresses: Angelica Cesario, Esq. David Slutsky, Esq. Gwynne Wilcox, Esq. Micah Wissinger, Esq. Levy Ratner, P.C. 80 Eighth Ave., Eighth Floor New York, NY 10011-7175 [email protected] [email protected] [email protected] [email protected] Darin M. Dalmat, Esq. David P. Dean, Esq. Ryan E. Griffin, Esq. Kathy L. Krieger, Esq. James & Hoffman, PC 1130 Connecticut Ave., NW, Suite 950 Washington, DC 20036 [email protected] [email protected] [email protected] [email protected] Barry M. Bennett, Esq. George A. Luscombe, III, Esq. Dowd, Bloch, Bennett & Cervone 8 S. Michigan Ave., 19th Floor Chicago, IL 60603-3315 [email protected] [email protected] Michael J. Healey, Esq. Healey & Hornack, P.C. 247 Fort Pitt Blvd., 4th Floor Pittsburgh, PA 15222 [email protected]

Mary Joyce Carlson, Esq. 1100 New York Ave., NW, Suite 500 West Washington, DC 20005 [email protected] Judith Scott, Esq. 1130 Connecticut Avenue, N.W., Suite 950 Washington, DC 20036-3975 [email protected] Jonathan Cohen, Esq. Eli Naduris-Weissman, Esq. Rothner, Segall & Greenstone 510 S. Marengo Ave. Pasadena, CA 91101-3115 [email protected] [email protected] Robert A. Hicks, Esq. Jeffrey A. Macey, Esq. Macey, Swanson and Allman 445 N. Pennsylvania St., Suite 401 Indianapolis, IN 46204-1893 [email protected] [email protected] Sean D. Graham, Esq. Weinberg Roger & Rosenfeld 800 Wilshire Blvd., Suite 1320 Los Angeles, CA 90017-2623 [email protected] Sharon Cohen, Esq. Doreen S. Davis, Esq. Willis J. Goldsmith, Esq. Joshua Grossman, Esq. Matthew Lampe, Esq. Jones Day

222 E. 41st St. New York, NY 10017-6739 [email protected] [email protected] [email protected] [email protected] [email protected]

Two Bala Plaza, Suite 300 Bala Cynwyd, PA 19004 [email protected] Joseph A. Hirsch, Esq. Hirsch & Hirsch One Belmont Ave. 8th Floor, Suite 8001 Bala Cynwyd, PA 19004 [email protected]

Brian W. Easley, Esq. Michael S. Ferrell, Esq. Jonathan M. Linas, Esq. Andrew G. Madsen, Esq. Jones Day 77 W. Wacker Dr., Suite 3500 Chicago, IL 60601-1692 [email protected] [email protected] [email protected] [email protected]

Craig R. Annunziata, Esq. James M. Hux, Jr., Esq. Steve A. Miller, Esq. Fisher & Phillips LLP 10 S. Wacker Dr., Suite 3450 Chicago, IL 60606-7592 [email protected] [email protected] [email protected]

George S. Howard Jr., Esq. Mhairi L. Whitton, Esq. Jones Day 12265 El Camino Real, Suite 300 San Diego, CA 92130 [email protected] [email protected]

Regina A. Petty, Esq. Fisher & Phillips LLP 4747 Executive Dr., Suite 1000 San Diego, CA 92121 [email protected] Roger K. Crawford, Esq. Best, Best & Krieger LLP 2855 E. Guasti Rd., Suite 400 Ontario, CA 91761 [email protected]

Aaron L. Agenbroad, Esq. Jones Day 555 California St., 26th Floor San Francisco, CA 94104 [email protected]

Thomas O’Connell, Esq. Ashley Ratliff, Esq. Best, Best & Krieger LLP 3390 University Avenue, Fifth Floor Riverside, CA 92501 [email protected] [email protected]

Robert Brody, Esq. Abby Warren, Esq. Kate Bogard, Esq. Brody and Associates, LLC 179 Post Rd. West Westport, CT 06880-4602 [email protected] [email protected] [email protected]

Louis P. DiLorenzo, Esq. Alison Z. Gottlieb, Esq. Tyler T. Hendry, Esq. Patrick V. Melfi, Esq. Bond, Schoeneck & King, PLLC

Claude Schoenberg, Esq. Schoenberg Law Office 7

600 Third Avenue New York, New York 10016 [email protected] [email protected] [email protected] [email protected]

Zachary Herlands Alex Ortiz Nicholas Rowe National Labor Relations Board, Region 2 26 Federal Plaza, Room 3614 New York, NY 10278 [email protected] [email protected] [email protected] [email protected] [email protected]

Deena Kobell, Esq. National Labor Relations Board, Region 04 615 Chestnut Street, Seventh floor Philadelphia, PA 19106-4404 [email protected]

Rachel See, Lead Technology Counsel National Labor Relations Board, Division of Legal Counsel 1015 Half Street, SE Washington, DC 20570 [email protected]

Edward Castillo, Esq. Christina Hill, Esq. Kevin McCormick, Esq. Sylvia Taylor, Esq. National Labor Relations Board, Region 13 209 South La Salle Street, Suite 900 Chicago, IL 60604-1443 [email protected] [email protected] [email protected] [email protected] Richard McPalmer, Esq. National Labor Relations Board, Region 20 901 Market Street, Suite 400 San Francisco, CA 94103 [email protected] Fredric Roberson, Esq. National Labor Relations Board, Region 25 575 N. Pennsylvania St. Suite, 238 Indianapolis, IN 46205-1520 [email protected] Rudy Fong-Sandoval, Esq. John Rubin, Esq. National Labor Relations Board, Region 31 11500 W. Olympic Boulevard, Suite 600 Los Angeles, CA 90064 [email protected] [email protected] Sophia Alonso Jacob Frisch 8

Dated: New York, New York October 14, 2015 ___/s/ Jamie Rucker ______________________ Jamie Rucker, Counsel for the General Counsel

9

UNITED STATES GOVERNMENT NATIONAL LABOR RELATIONS BOARD Agency Website: www.nlrb.gov Telephone: (212) 264-0300 Fax: (212) 264-2450

REGION 2 26 Federal Plaza, Suite 3614 New York, NY 10278-3699

March 27, 2015 Via Electronic Mail [[email protected]; [email protected]; [email protected]; [email protected]] Doreen S. Davis, Esq. Willis J. Goldsmith, Esq. Matthew W. Lampe, Esq. Jonathan M. Linas, Esq. Jones Day 221 East 41st Street New York, NY 10017 Re:

Lewis Foods of 42nd Street, LLC and McDonald’s USA, LLC, as Joint Employers, et al. Case Nos. 02-CA-093893, et al.

Dear Ms. Davis and Messrs. Goldsmith, Lampe, and Linas: Thank you for your time yesterday. The meeting was an important initial step and we are optimistic that additional discussion will result in significant understandings and practical arrangements for dealing with document production—particularly ESI—that will benefit all parties. In order to maintain the progress made yesterday and to ensure we understand one another’s positions, I write to clarify where I believe matters stand with respect to discussions regarding a preliminary group of key custodians Respondent McDonald’s would include in the scope of its initial search for ESI and other documents encompassed by the General Counsel’s subpoena duces tecum to McDonald’s. As you know, in an effort to explore ways of refining the scope and focus of outstanding document requests, counsel for the General Counsel has asked about the names, titles and organizational roles of those individuals who would possess documents responsive to the subpoena. Yesterday, you identified twenty-eight (28) custodians (by name and/or job title) you believed would possess substantial material responsive to the subpoena. As I understood the proposal, it was a good faith attempt to “jump start” document production consistent with the idea that the General Counsel could later ask Respondent to expand the custodial pool if results or further information warranted. On that basis, counsel for the General Counsel was quite receptive to your suggestion.

Exhibit 1

However, further discussion between the technology experts for General Counsel and Respondent, viz., Ms. See and Mr. Linas, revealed that if an initial ESI search protocol (using predictive coding) is developed based on that limited list of 28 custodians, a subsequent expansion of the custodian set would either likely result in low quality document production (i.e., low precision or recall rates) or potentially substantial additional cost to your client. Rather than insist that one party or the other grasp a horn of this dilemma immediately, I suggest we defer agreement on the key ESI custodian set until we engage in further disclosure and cooperation. I believe the parties will be in a much better position to agree on an appropriate custodian set for ESI search using predictive coding once the General Counsel has had an opportunity to review (1) the list of the 240 custodians (by name and job title) you initially identified as potentially possessing relevant evidence and (2) the organizational chart asked for in paragraph one of the General Counsel’s subpoena. If I understood you correctly yesterday, you anticipated that such information would be available sometime early next week. I do not think postponing the decision on a final custodian set a few more days will significantly burden or delay the process, but if you strongly disagree, please so advise me. Very truly yours, /s/ Jamie Rucker Jamie Rucker

UNITED STATES GOVERNMENT NATIONAL LABOR RELATIONS BOARD Agency Website: www.nlrb.gov Telephone: (212) 264-0300 Fax: (212) 264-2450

REGION 2 26 Federal Plaza, Suite 3614 New York, NY 10278-3699 April 1, 2015

Via Electronic Mail [[email protected]; [email protected]; [email protected]; [email protected]] Doreen S. Davis, Esq. Willis J. Goldsmith, Esq. Matthew W. Lampe, Esq. Jonathan M. Linas, Esq. Jones Day 221 East 41st Street New York, NY 10017 Re:

Lewis Foods of 42nd Street, LLC and McDonald’s USA, LLC, as Joint Employers, et al. Case Nos. 02-CA-093893, et al.

Dear Ms. Davis and Messrs. Goldsmith, Lampe, and Linas: I write to confirm counsel for the General Counsel’s position regarding the minimum steps that McDonald’s USA, LLC’s (“McDonald’s”) must promptly take to demonstrate good faith efforts to comply with the subpoena duces tecum served upon McDonald’s by the General Counsel (“GC”) on or about February 9, 2015.1 As you know, on March 30 the Administrative Law Judge was forced to defer the start of the trial from the week of May 11, as provided in the March 3 Case Management Order, because the parties had failed to make adequate progress in producing discovery material. McDonald’s declined to meet and confer regarding subpoena compliance until March 26, just two business days before the opening of the record in these cases. Additionally, despite the GC’s repeated requests, McDonald’s refused at both the March 26 conference and the March 30 hearing to identify the 240 custodians it has repeatedly asserted have relevant documents, or even to produce any organizational chart(s) to enable informed judgment about ways to prioritize document production or narrow the universe of potential custodians for review and production. McDonald’s has likewise refused or ignored the GC’s repeated overtures regarding potentially constructive stipulations that could reduce the volume of documents to be collected and produced. Meanwhile, the GC has been openly receptive and responsive to Respondent’s desire 1

All dates hereinafter are in 2015.

Exhibit 2

for “rolling production,” provided the GC could be confident of receiving significant and timely initial production from an adequate roster of key custodians. The GC did receive the initial 726 pages of McDonald’s production and looks forward to receipt and review of additional documents on or about April 2. We are hopeful that the latter production will constitute meaningful compliance with McDonald’s subpoena obligations. In light, however, of the urgent need to prepare for the May 26 commencement of hearings and McDonald’s continued failure to accomplish even the minimal first steps enabling good faith negotiations over the scope, pace, and priorities of further production, we believe McDonald’s should (1) immediately produce those responsive documents, catalogued below, that can be readily identified and produced without the need to use keyword searches across multiple custodians; (2) engage in good-faith discussions, along the lines suggested below, about stipulations that could alleviate the burden McDonald’s has claimed in its objections to certain requests; and (3) identify relevant custodians and sources of ESI and conduct reasonably designed searches for ESI in the possession, custody, and/or control of those custodians. We currently believe that McDonald’s failure to undertake these reasonable and essential compliance steps, discussed in further detail below, would leave the General Counsel little choice but to initiate subpoena enforcement proceedings in federal district court. Part 1: For more than a quarter of the subpoena requests, described in more detail below, McDonald’s should be able to readily identify and retrieve responsive documents without the need for keyword searches on custodian data or the use of other search technology such as predictive coding. To comply with its subpoena obligations, McDonald’s should thus produce this material promptly upon judicial approval of the negotiated protective order (or one substantially similar). Paragraphs 1 and 2 of the subpoena seek information that should be available in a readily comprehensible form. As noted by one counsel, information regarding the structure and division of responsibilities of a large publicly held corporation like McDonald’s must be available for provision to investors and regulators alike in the ordinary course of business. Thus, it is inexplicable that McDonald’s maintains it does not know where and how this information is kept. To demonstrate good-faith compliance with your subpoena obligations, you should provide this information within a day or two of entry of a protective order. Paragraph 3 asks only for the identities of the Business Consultants or equivalent employees assigned by McDonald’s to the Charged Franchisees. These identities must be maintained and organized according to franchisee and hence available without performing any keyword custodial searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce this information within a day or two of entry of a protective order. Paragraph 4 asks for the documents embodying the franchise relationship between McDonald’s and the Charged Franchisees. As would be required to make it possible for McDonald’s to track and administer those relationships—and as you conceded at our meeting on Thursday, March 26—those documents must be maintained and organized according to franchisee. Keyword

searches of custodian ESI are not required to locate these documents. To demonstrate good-faith compliance with your subpoena obligations, you should produce this information within a day or two of entry of a protective order. Paragraphs 5 and 6 seek a single document each, identified by name, viz., the applicable Operations and Training Manual and applicable QSC Playbook. Both documents are central to McDonald’s maintenance of its “System” and, as acknowledged at the March 26 meeting, should therefore be readily available. To demonstrate good-faith compliance with your subpoena obligations, you should produce this information within a day or two of entry of a protective order. In response to inquiries by me at the March 26 meeting, McDonald’s appeared to assert that it does not maintain any documents responsive to paragraph 7 of the subpoena aside from the applicable franchise agreements, which would be produced in response to paragraph 4, and the Franchise Disclosure Document. If so, to demonstrate good-faith compliance with your subpoena obligations, you should produce this information within a day or two of entry of a protective order. In response to a suggestion made by Mr. Goldsmith at the March 26 meeting, I agreed to narrow the scope of request number 8. Further, I explained that the General Counsel is interested in documents describing how franchisees are to use the computerized tools identified by name in that paragraph, along with one other tool, the Global Data Collection Tool. I also noted that the language at the end of that request served to exclude documents describing (1) the use of pure payment tools such as credit card readers and (2) the operation of kitchen equipment such as the Universal Holding Cabinet or Heated Landing Zone. To demonstrate good-faith compliance with your subpoena obligations, you should produce documents responsive to this narrowed request within a day or two of entry of a protective order. Paragraph 10 asks for documents describing the scope of McDonald’s contractual rights and actual powers and to monitor its franchisees’ operations through the computerized tools it requires those franchisees to purchase and/or use, as identified in paragraphs 7–9 of the subpoena. Because these documents govern the contractual relationships McDonald’s has with its franchises, they should be retrievable without the need for custodian-based keyword searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce responsive documents within a day or two of entry of a protective order. Alternatively, the General Counsel is amenable to receiving an appropriate stipulation specifying the breadth and depth of McDonald’s authority and actual ability to monitor the day-today operations of its franchisees over a wide array of measures—powers strongly suggested by McDonald’s own Franchise Disclosure Document to be essentially unlimited—in lieu of receiving documents responsive to this paragraph of the subpoena. Paragraph 12 is aimed primarily at production of the algorithms or criteria employed by the Hiring to Win program, Dynamic Shift Positioning Tool, Positioning Secondary Duties Guides, Static Shift Positioning Guide, Labor Schedule 2.7 software, and/or the Staffing, Scheduling, and Positioning for Operational Excellence program. Such information should be contained in

documentation maintained by the teams or individuals responsible for the development of such software. Production of formal documentation for this software should be a straightforward matter. To demonstrate good-faith compliance with your subpoena obligations, you should produce those documents within a day or two of entry of a protective order. Paragraph 14 requests negative evaluations or warnings issued to Charged Franchisees for failure to comply with the requirements of McDonald’s “System.” Because McDonald’s makes the requirement of compliance with its “System” a central feature of its contractual relationship to its franchisees and because McDonald’s evaluates such compliance both on an ongoing basis and in connection with eligibility for what McDonald’s calls “growth” and “rewrite” eligibility, this franchise-by-franchise information should be available without the need for custodian-based keyword searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce responsive documents within a day or two of entry of a protective order. Paragraphs 24 and 28–35 seek the elements and requirements of specific training programs McDonald’s maintains and which are used by its franchisees in the training of their employees and managers. Most if not all of these training programs constitute integrated systems, and program-by-program information should thus be available without the need for custodian-based keyword searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce responsive documents within a day or two of entry of a protective order. Paragraph 42 requests employee handbooks, manuals, or policies McDonald’s maintains for the use of its franchisees. Since much of the purpose of such documents would be lost if they were not readily locatable and retrievable, McDonald’s must maintain and organize these documents in manner allowing such straightforward retrieval, without the need for custodian-based keyword searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce responsive documents within a day or two of entry of a protective order. Paragraphs 86 and 87 request very specific performance measures set by McDonald’s regarding the retail transactions conducted by its franchisees, specifically the time it takes to get orders to customers and the number of customer transactions (or similar) per time unit conducted by franchisees. These measures are central to McDonald’s metric of successful restaurant operation—as evidenced by the extent to which McDonald’s staffing and scheduling guidelines are built around these measures—and should be retrievable without the need for custodian-based keyword searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce responsive documents within a day or two of entry of a protective order. Paragraph 88 seeks specific surveys conducted by or at the behest of McDonald’s. The utility of these surveys is tightly linked to their correct application. Indeed, the entire point of the surveys is analysis and evaluation of what they purport to measure. As a result, McDonald’s must maintain and organize the surveys, their instruction guides, and the results flowing from their administration in a readily identifiable location and in a readily usable form. They can thus be identified and produced without custodian-based keyword searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce responsive documents within a day or two of entry of a protective order.

Paragraph 90 seeks a single document, identified by title. That one document should therefore be readily retrievable without the need to conduct any custodian-based keyword searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce the document within a day or two of entry of a protective order. Paragraphs 93–98 and 101 seek information regarding the review and revision process McDonald’s uses to measure the performance of franchisees and to monitor their compliance with various requirements of the McDonald’s “System,” franchise agreement, etc. McDonald’s makes the requirement of compliance with its “System” a central feature of its contractual relationship to its franchisees. It evaluates such compliance both on an ongoing basis and in connection with eligibility for what McDonald’s calls “growth” and “rewrite” eligibility. And franchisee performance along the measures tested by the review and revision process at issue in these paragraphs are factors in growth and rewrite eligibility. These factors all indicate that responsive information is organized on a franchisee by franchisee basis and can be located and produced without the need for custodian-based keyword searches. To demonstrate good-faith compliance with your subpoena obligations, you should produce responsive documents within a day or two of entry of a protective order. Part 2: Together, the preceding group and the following subpoena requests account for roughly 40% of the numbered items in the subpoena, none of which requires McDonald’s to conduct custodianbased keyword searches (or to use predictive coding or other advanced analytics) to locate the documents responsive to these requests. Further, the following suggestions outline ways in which McDonald’s can reduce the burden upon itself simply by performing its duties of disclosure and cooperation in a full and frank fashion. Paragraphs 17 and 19–22 concern two computerized tools, viz., Hiring to Win and McState, a single print guide, namely the Recruitment Reference Manual, and a single public relations event, National People Week, that McDonald’s provides or makes available to its franchisees for them to use in connection with hiring their employees. If McDonald’s can describe the scope and content of its review and analysis of these tools and materials to the General Counsel with sufficient detail, it may well be possible to reduce the scope of these requests considerably by accepting appropriate stipulations or documents embodying such review in place of certain of the demands of these paragraphs. As discussed at our meeting on Thursday, March 26, paragraphs 63–74 of the General Counsel’s subpoena requests are aimed at discovering the degrees to which McDonald’s monitors, analyzes, evaluates, and reports on franchisee staffing and scheduling. I am aware of the existence of certain reports, such as those identified in paragraphs 70–72 of the subpoena, but am not aware of all of the measures provided by those reports. As I offered at our March 26 meeting, the General Counsel would be willing to significantly withdraw or narrow some of these subpoena paragraphs if McDonald’s were to stipulate, in sufficient detail, to information regarding the types and content of employee scheduling reports McDonald’s can create regarding its franchisees.

Part 3: In addition to producing readily available information promptly upon entry of a protective order and engaging in good-faith discussions of acceptable stipulations, compliance with the subpoena will still require McDonald’s to identify relevant custodians and conduct reasonably designed searches for ESI in the possession, custody, and/or control of those custodians. In order to engage in an informed and reasonable discussion regarding how McDonald’s will comply with its duty to respond to the General Counsel’s subpoena, and consistent with guidance from federal judges and set forth in The Sedona Principles (Second Edition), Principle 3 and accompanying commentary (June 2007); see also The Sedona Conference Cooperation Proclamation (“Courts see these rules as a mandate for counsel to act cooperatively. Methods to accomplish this cooperation may include…Exchanging information on relevant data sources, including those not being searched”); Cooperation Guidance for Litigators and In-House Counsel, Cooperation Point 5 (March 2011), the General Counsel has sought to have McDonald’s identify the names and job titles of the 240 individuals who McDonald’s represented to the Court possessed potentially responsive electronically stored information. In response, McDonald’s disclosed the names and job titles of 28 individuals, and has refused to make additional disclosures regarding the identity of the other 212 (or more) individuals cited in its Petition to Revoke and subsequent filings. McDonald’s presumably has already determined the identity of these 240 individuals described in its Petition to Revoke. Without further disclosure of the identity of these individuals, the General Counsel is unable to engage in a meaningful discussion regarding whether a search of their ESI is necessary to comply with the General Counsel’s subpoena, or whether McDonald’s can avoid incurring the expense of conducting searches of these custodians’ documents and electronically stored information. To avoid the need for enforcement action, McDonald’s should provide the names and job titles of the 240 individuals it has already identified as likely possessing relevant information responsive to the subpoena by no later than noon on Friday, April 3. McDonald’s has repeatedly asserted that at least 240 individuals likely possess relevant information responsive to the subpoena, and vigorously argued the burden of producing from so many custodians (though McDonald’s neglected to promptly advise the Administrative Law Judge it had overstated the number of documents from these custodians that would be subject to review by at least a factor of four). In light of the above, and the General Counsel’s repeated offers to negotiate substantial reductions in the number of custodians from whom production need be collected and reviewed, it is inexplicable that McDonald’s continues to refuse to provide such limited and manifestly available information to begin those negotiations. Finally, during the March 26 meet-and-confer session, in addition to discussing predictive coding issues, Ms. See and Mr. Linas discussed the need for additional disclosures and discussions regarding the sources of ESI containing potentially responsive information, as well as how those sources might be duplicative of other more accessible sources. In particular, Ms. See and Mr. Linas discussed the need for additional disclosures regarding ESI stored exclusively on mobile devices or on disaster-recovery systems, i.e., backup tapes. Please contact me to schedule those follow-up discussions.

I remain hopeful that we can resolve these threshold disputes without otherwise wholly needless and expensive subpoena enforcement litigation. Please feel free to call me if you wish to discuss these issues. Very truly yours, /s/ Jamie Rucker Jamie Rucker

Exhibit 3

.JONES D.AY EAST 41 ST +1

• NEW YORK. NEW YORK 1 • FACSIMILE:

+.

17 6702

21 2.

NUMBER' 'NGOLDSM!TH@JONC:SDAY.COM

JP540661 :jml 611358-600119

May 22. 2014

VIA FEDERAL EXPRESS & EMAIL Mr. Barry J. Kearney Associate General Counsel of the Division of Advice National Labor Relations Board 1099 14th St. N.W. Washington, D.C. 20570-0001 harry [email protected] Re:

Fast Food Workers Committee (McDonald's USA. LLC), Cases No. 2-CA093893, 2-CA-093895. 2-CA-093927, 2-CA-094224, 2-CA-094679, 2-CA097827, 2-CA- 097305, 2-CA-98604, 2-CA-098009, 2-CA- 098662, 2-CA098659, 2-CA-098676. 2-CA-103384. 2-CA-103390, 2-CA-103430, 2-CA103726, 2-CA-103771. 2-CA-105591, 2-CA-106094

Dear Mr. Kearney: This letter follows up on our April 25, 2014 meeting with respect to the allegation that McDonald's USA, LLC ("McDonald's" or "Company") is a joint employer in the abovereferenced unfair labor practice charges ("Charges") filed by the Fast Food Workers Committee. We appreciate the opportunity to supplement our previous submission to the Division of Advice ("'Division" or "Advice") and our various position statements submitted to the Region in these cases. 1 We address below the issues raised in our discussion on April 25th. While McDonald's serves its franchisees' interests by protecting the McDonald's brand and helping them run successful businesses. McDonald's does not in any way "share or codetermine those matters governing the essential terms and conditions of employment" of its franchisees' employees. TL!. Inc .. 271 NLRB 798 (1984), enfd 772 F.2d 894 (3d. Cir. 1985). Although we do not believe it is for Advice to decide the joint employer question now and should instead direct the to nrn,r>Pc•rt IS

1

McDonald's previously submitted a statement to the Division on October 3. 2013, and submitted position statements to Region 2 on January 11, 2013, March 26. 2013, May 29. 2013, July 5, 2013. and July 25, 2013.

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May 22. 2014 Page 2 not a joint employer of its franchisees' employees for the reasons set forth herein and in our previous submissions. I.

McDonald's Response to the SEIU's Corporate Campaign Is Not Indicative of a Joint Employer Relationship.

The SEIU and its affiliate organizations spent over $38 million last year on a corporate campaign targeting McDonald's and other quick-service restaurants.2 Neither the intent nor the result of this enormous spend was for the SEIU to obtain representation of the employees of any particular franchisee, much less the employees of the franchisees named in the various unfair labor practice charges you are reviewing. Instead, it was a massive public assault through coordinated media attacks, published campaign-funded studies, employee '·days of action," federal and state court litigation, and restaurant-level business disruptions. The target of this assault was not specific McDonald's-owned or franchisee-owned restaurant locations, but rather the McDonald's brand itself - indeed, the campaign made no effort to distinguish between McDonald's and its franchisees. Obviously, this has not been a traditional organizing campaign by the SEIU and its locals. Despite over nineteen months of campaigning, there have been no representation petitions filed, no demands for recognition, no requests for neutrality, no 8(b )(7) actions, and no requests for a card check. It is a campaign that exists predominately, if not entirely, in the public sphere and seeks to disparage McDonald's as a brand. Media reports and campaign-funded studies attack the brand and provide anti-McDonald's rhetoric. 3 Published videos from union-funded sources repeatedly target the brand alone. 4 And coordinated "days of action" in various cities and at McDonald's headquarters also seek to publicly condemn the brand. 5 Other incidents, such as

2

This figure has been derived from an examination of 2013 LM-2 filings by the SEIU International and some of its key locals in New York, Chicago. Los Angeles, and Oakland. 3

See, e.g.. Employment Law Project, Super-Sizing Public Costs: How Low Wages at Top Fast-Food Chains Leave Tcn:payers Footing the Bill (October 2013); Sylvia Allegretto, et al., Fast Food, Poverty Wages: The Public Cost of Low-Wage Jobs in the Fast-Food Industry (October 2013 )(with funding from fast Food Forward); Michele Simon, Clowning Around with Charity - Ho1v AkDonald ·s Exploits Philanthropy and Targels Children (October 20 l 3)(with support from Corporate Accountability International): Fast Food Forward, " "Report (\1ay l UnitedNY The Center for

'A recent day of action occurred on May 15, when McDonald's was directly targeted by campaign protests at 142 restaurants in more than 55 cities throughout the United States. and internationally in approximately 2 I countries. In certain markets. McDonald's faced aggressive demonstration behavior including protesters paying with pennies at

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May 22, 2014 Page 3 protesting at McDonald's CEO Don Thompson's residence, attempting to disrupt a McDonald's shareholders meeting to deliver a petition, and interrupting a keynote speech by Jeff Stratton. McDonald's USA's President, are merely public spectacles, essentially street theater, directed entirely at the brand. Indeed, just yesterday, on May 21, 2014, over 1,000 protestors stood adjacent to McDonald's worldwide corporate headquarters in Oak Brook, Illinois to protest the brand. Among those protestors was Mary Kay Henry, the SEIU International President, who succeeded in a public stunt of being arrested for defying local police instructions. These activities, viewed as a whole, clearly mark McDonald's as the "primary employer" subject to a coordinated campaign by the SEIU. In light of this well-coordinated public attack on the brand, it is not at all surprising and entirely appropriate that McDonald's and its franchisees work together to publicly respond. Indeed, for over 58 years, McDonald's has driven its successful brand and customer loyalty by partnering with its hard working franchisees. McDonald's and its franchisees cultivate a uniform public image through a shared business model that includes, for example, the same core food products, the same design and color schemes for restaurant buildings, and the shared use of trade names and trademarks. McDonald's and its franchisees have long worked together and shared information in order to communicate effectively with the public. For example, both franchiseemvned and McDonald's-o\\lned restaurants participate in cooperatives that determine the marketing and advertising initiatives in their respective markets throughout the country. This shared approach to presenting a unified public image to strengthen the brand existed well before the union corporate campaign and is standard in franchising relationships. 6 McDonald's sharing of information with its franchisees during the union corporate campaign to defend the brand against repeated public attacks has no bearing on the question of joint employment. McDonald"s actions are not related to ·'the essential terms and conditions of employment" of any franchisee's employees. See Yellow Cab Co., 208 NLRB 1020, 1021 (1974) (finding no joint employer relationship where none of the shared services such as advertising ··pertain[ed] to the conduct of labor relations''). McDonald's did not and does not

. )

''··Typically, a franchisor imposes systemwide standards ... with regard to: advertising and promotion .... " Kevin M. Shelley & Susan H. Morton, .. Control" in Franchising and the Common Law. 19 Franchise L. J. 119. 121 (2000).

May 22, 2014 Page 4 require any franchisee to take any action with regard to its employees' wages, hours, or working conditions in response to the corporate campaign. Indeed, McDonald's and its franchisees can communicate freely with their respective employees and the public in response to the union corporate campaign so long as, as to employees, these communications contain no threat of reprisal or force or promise of benefits. Under Section 8(c) of the Act, McDonald's expression "of any views, argument, or opinion, or the dissemination thereot: whether in written, printed, graphic, or visual form, shall not constitute or be evidence of an unfair labor practice ... if such expression contains no threat of reprisal or force or promise of benefit." McDonald's engaged in no communications that contained a threat of reprisal or force or promise of benefit. Nor did McDonald's direct its franchisees to do so. While McDonald's acknowledges the union's right to engage in a lawful corporate campaign publicly targeting the brand, McDonald's has the right to respond to this attack or Section 8(c) of the Act is meaningless. At our April 25th meeting, the General Counsel inquired whether directions were given to a franchisee about who would be its spokespersons to the media in the event of a mass demonstration at its restaurant. The answer is no. McDonald's media guidelines were made available to franchisees, but the first page of those guidelines states, "[t]his communication is informational only and should not be construed as establishing requirements applicable to any Owner/Operator.., (See Exhibit A, at 17). Recently, an unknown source provided the media with an April 17, 2014 email with several attachments - one of which contained McDonald's media guidelines - from McDonald's Vice President of U.S. Human Resources to McDonald's franchisees and McDonald's-owned restaurant personnel. See Wall Street Journal Online, McDonald's Prepares for Another Day of Protests, available at http://blogs.wsj.com/corporate-intelligence/2014/05/07/mcdonaldsprepares-for-another-day-of-protest/ (as of May 22, 2014). The email notifies franchisees of two upcoming "days of action'' and attaches several documents: McDonald's general demonstration guidelines; notification of an optional legal hotline franchisees can use to contact a Littler Mendelson attorney; a ·'Restaurant Fun Toolkit" franchisees can use to recognize employees; and suggested talking points. (Exhibit A). There is nothing remotely unlawful in these documents and, most importantly for our purposes, nothing that touches on codetermination of wages, hours. or terms and conditions of employment for franchisees' employees. Furthermore, as with to 1

Each of the attachments contains a clear reminder that the franchisee is entirely responsible for labor relations

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May 22. 2014 Page 5 The General Counsel also asked whether McDonald's made available to its franchisees corporate security in the event of mass demonstrations. The answer is yes, if a franchisee chose to use the security company engaged by McDonald's. Some have utilized McDonald's security services while some franchisees have hired their own security services. Given that McDonald's owns or leases the land and buildings where franchisee restaurants operate, the offer of security services merely evidences an owner's protection of its property interest. It has no bearing on the question of joint employment. More specifically, making security available to franchisees is a far cry from the type of ·'direct and immediate'' control over labor relations that would justify a finding of joint employment under Board law. In re Airborne Express, 338 NLRB 597, 605 (2002). See Southern California Gas Co., 302 NLRB 456 (1991) (finding no joint employment relationship and stating, "the question of joint employer status must be decided upon the totality of the facts of the particular case."). Indeed, making security available to franchisees for demonstrations on McDonald's owned or leased property is not "labor strategy" and, even if a franchisee utilized corporate security, McDonald's had no ''direct and immediate" control over its franchisees' employees. In summary, none of the actions taken by McDonald's to protect its globally known and recognized brand constitute codetermination of wage, hours, or other terms and conditions of employment for its franchisees' employees and do not evidence a joint employer relationship under existing, long-established Board law. II.

McDonald's Provides Various Optional Tools to Franchisees to Help Them Run a Successful Business, But Does Not Co-Determine the Terms and Conditions of Employment for Franchisees' Employees.

McDonald's, like other franchisors, offers various services and tools to its franchisees to assist them in developing their businesses. McDonald's is deeply committed to providing resources to help these small business owners provide good jobs and opportunities to their employees, and has a strong track record of doing so. McDonald's encourages its franchisees to use these resources, and most do, understanding that the resources benefit not only their individual businesses, but also the overall McDonald's brand. As the Board recognizes, ·'[a] .)

are employers and make their own policies regarding employment-related matters. Owner/Operators may choose to use information from these materials that will be helpful to them in operating their own McDonald's restaurant(s). If you work for an Owner/Operator organization, please check with your Owner/Operator. or the person designated by your Owner/Operator. to determine whether and which of these materials apply to your organization.'"

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May 22, 2014 Page 6 franchisor, wishing to attract franchisees and thus profit from [its] franchise system, may offer certain exclusive services of one kind or another to [its] franchisees. But, whatever business advantages may be offered to franchisees by franchisors in terms of services rendered to or on behalf of its franchisees, they cannot create the legal relationship of employer-employee as between employees of the franchisees and the management of the franchisor." Yellow Cab Co., 208 NLRB at 1022 (finding no joint employer relationship where none of the shared services such as advertising, training, and investigation of complaints against franchisees' employees ·'pertain[ed] to the conduct of labor relations"). As we made clear in our previous submissions, the services and tools offered to each McDonald's franchisee are optional for the franchisee to use, or not use, in its discretion. 8 And contrary to certain publicly-made assertions, McDonald's does not benefit if its franchisees reduce liabilities - including labor costs - on their balance sheets. As the franchise agreements provided to the Board made clear. McDonald's receives from each franchisee rent along with a monthly service fee that is based on a percentage of monthly gross sales at the franchisee's restaurant. (Franchise Agreement at iii! 7-8). Gross sales are not impacted by labor costs: concomitantly, neither is the service fee McDonald's receives each month. (Id. at if 7). Only the franchisee not McDonald's - has a financial incentive to manage its labor costs because, as in any other business, those costs impact the franchisee's profit. In short, McDonald's has no financial incentive to require any franchisee to use the tools and services it offers to reduce labor costs at the franchisee's restaurant. McDonald's In-Store Processor Software and Other Optional Scheduling Tools Do Not Co-Determine the Terms and Conditions of Employment For Franchisees' Employees. The vast majority of franchisees purchase an In-Store Processor ("ISP") from a vendor. The ISP comes equipped with proprietary software developed by McDonald's. While the ISP stores data that is used in managing various aspects of restaurant operations - including sales, 8

The General Counsel inquired at our April 25th meeting whether McDonald's believes that a joint employer finding is appropriate if a franchisor sets the wage rates of its franchisees' employees. Although we do not set the the wage rates would make us a joint employer under wage rates of our franchisees, we do not believe that current Board law. The Board has refused to find a even when one

former subcontractor were reasoned \Vere not despite facts demonstrating that the entity approved all of the subcontractor's new hires and annual wage rate increases. Division of Advice Memorandum, RVT Maintenance and El Dia, Inc. rEDIJ (Nov. 26, 2002). But this question is purely academic as there is no evidence that McDonald's set the wage rates for franchisees' employees. In fact, it does not.

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May 22. 2014 Page 7 customer counts. menu and price information, product mix information, inventory, waste, and product order information the ISP software can be (but is not required to be) used by franchisees to create employee schedules as well. But McDonald's does not schedule franchisees' employees for work. Although the ISP software provides a schedule format, each franchisee has control over the key variables needed to create the schedule best suited to his/her restaurant, e.g., the number of employees, employee station ratings, and employee availability. Franchisees also can modify the schedule after it is generated, such as by adding or removing an employee from the schedule, changing the length of an employee's shift. changing the assigned station of the employee, or totally ignoring the schedule in its entirety. Because the franchisee is not required to use the scheduling software and, if it chooses to use it, controls the input and the output, McDonald's does not exert "direct and immediate" control over the work schedules for franchisee employees. Indeed, McDonald's is no more in control of co-determining its franchisees' employee's work schedule than, for example, Microsoft is responsible for co-determining the content of this submission because we used a Word program template to produce it. The General Counsel expressed interest at our meeting in whether McDonald's provides a system to its franchisees that tracks labor costs as a percentage of sales at franchisee restaurants and, depending on the percentage, will prompt the user to reduce headcount. McDonald's does not direct its franchisees to reduce headcount. Rather, at the franchisee's discretion to generate it the ISP software can produce a report that displays labor costs as a percentage of sales over a given time period. The report does not display a direction to the franchisee to reduce headcount. Moreover, this report is for the franchisee's use and, again, is not used by McDonald's to direct a franchisee to reduce headcount. As with the decision to generate such a report, how to interpret the labor percentage displayed on the report is entirely within the discretion of the franchisee and its managers. Of course, a franchisee's manager could determine that its restaurant would be best served by reducing headcount if he/she believes a high labor cost percentage is a symptom of overstaffing. but McDonald's does not require the manager to do so. It is equally possible that the manager -vvould reasonably believe that a high labor cost percentage is a symptom of low sales due to slow service, not having the right people in the right positions, or a myriad of other factors (internal and external) that could be remedied without reducing headcount. Thus, it is a

May 22, 2014 Page 8 B.

Exclusive Hiring Platforms Offered To Franchisees Do Not Support A Joint Employer Finding Because McDonald's Does Not Determine Who Its Franchisees Hire.

Likewise, franchisees have access to online hiring platforms, McState and Hiring to Win. Franchisees are not required to use either of these services. Mc State is a collection of websites and a hiring platform for which franchisees pay an annual fee to a third party to use. Prospective employees who seek to apply for a job at a McDonald's restaurant online can do so through Mc State if the franchisee is a subscriber. Each restaurant's homepage, which the franchisee can customize, identifies whether the restaurant is owned and operated by McDonald's or a franchisee. After the applicant selects whether he or she is applying for a crew or manager position at the restaurant, the applicant is invited to fill out and submit a job application online. Hiring to Win likewise is an optional online hiring platform provided by a third party, Aon. In addition to the traditional application, it contains an employment assessment that is purportedly designed to identify hospitality-focused crew members and leadership-oriented managers. The employment assessments are conducted by Aon and Aon provides the results of the assessment directly to the franchisee, not to McDonald's. Hiring to Win is not mandatory for franchisees; approximately 10% of franchised restaurants in the United States do not subscribe to it. Subscriber restaurants pay Aon an annual fee per restaurant to participate. Neither of these online hiring platforms provides a basis for a finding of joint employment. Both are optional services. Franchisees may use various other platforms at their disposal as well, including Monster.com and similar service providers. Most importantly, McDonald's does not require franchisees to hire or not hire any applicant who submits an application to the franchisee through McState or Hiring to Win or any other application, process, or platform. Not only is a franchisee not required to use any particular online hiring platform, but McDonald's does not control the decisions the franchisee makes with regard to its applicants if it does use them. Further, franchisees are free to use other methods for hiring, including accepting applications directly at the store locations. Thus there is no basis to conclude that McDonald's exercises "direct and immediate control" over the hiring decisions for franchisees' employees simply because franchisees have the option to use (or not use) any given online hiring platform. Airborne Express, 338 NLRB at NLRB at 1 certain one or another to [its] But, whatever business advantages may be offered to franchisees by franchisors in terms of services rendered to or on behalf of its franchisees, they cannot create the legal relationship of employer-employee as between employees of the franchisees and the management of the franchisor.").

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'v1ay 22, 2014 Page 9 McDonald's Optional WOW Orientation Also Does Not Support Joint Employer Status. McDonald's also offers franchisees the option to purchase materials from a third party that can be used and/or customized to conduct an employee orientation called a WO\V orientation. McDonald's also offers its franchisees a standard orientation instruction manual, which encourages owner-operators to customize and personalize orientations. McDonald's does not require franchisees to use the WOW orientation. Whether a franchisee chooses to use or not use a WOW orientation is within the franchisee's complete discretion. McDonald's offer to assist the franchisee by providing instructions on how to conduct an effective orientation is not even arguably an exercise of direct and immediate control that justifies a joint-employer finding under current Board law. See S. G. Tilden. Inc., 172 NLRB 752, 753 (1968) ("The offer by [the franchisor] to train prospective employees of the franchisees was an offer to help by [the franchisor] and not the exercise of any authority over [the franchisees'] policies.") D.

Consulting Services Are Provided to Franchisees to Help Them Run a Successful Business, Not to Determine the Terms and Conditions of Employment for Franchisees' Employees.

McDonald's employs business consultants whose role is to consult with franchisees to help drive sales results. Such business consultants are common in franchise relationships and are not indicative ofjoint employer status. See, e.g., Courtlandv. GCEP-Surprise. LLC. No. CV-1200349-PHX-GMS, 2013 BL 200819 (D. Ariz. July 29, 2013)(franchisor Buffalo Wild Wings employs franchise consultants assigned to franchisee restaurants, but no joint employment found); Kearney v. Kessler Family LLC, No. l l-CV-06016., 2011BL180795 (W.D.N.Y. July 11, 2011 )(franchisor employs Area Franchise Consultant, but no joint employment found). Business consultants do not have potential or actual "direct and immediate'' control over labor relations at franchisees' restaurants. McDonald's business consultants' primarily are responsible for administering 'vkDonald's formal, interactive process the Restaurant Operations Improvement Process ('·ROIP'') - to assess franchisees' compliance with Quality, Service. and Cleanliness (QSC) standards and to \Nork with franchisees to assist them in complying with these standards. As a model franchisor entrusted with an iconic brand, McDonald's sets high expectations for to ("SOR'") franchisee fails one of these visits, additional visits may be scheduled. If a franchisee does not improve sut1iciently after a failed visit, the restaurant at issue can be placed in the Improvement Process for Underperforming Restaurants ("IPUR'} The ultimate consequence of IPUR could be that the franchisee may not be eligible to obtain additional franchise restaurants or renew his

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May 22. 2014 Page 10 current franchise agreement at the end of its term, or, in rare situations, a franchisee's agreement could be terminated. See Speedee 7-Eleven, 170 NLRB 1332, (1986) (right to terminate franchise agreement upon 30 days notice is not evidence of joint employer relationship). Each FOR and SOR is scored to determine whether the franchisee passes or fails the visit. Although a '·People Review" is conducted during the FOR (and a shorter version of the '·People Review" is conducted during the SOR), unlike the other components it is not scored and thus does not determine the franchisee's eligibility for growth or re\\ITite. Further, the People Review makes clear on the first page that, ·'[a]s an independent Owner Operator, you are exclusively responsible for employment matters within your organization." A reminder at the bottom of every page states, .. [i]f you are an Owner Operator, you are exclusively responsible for complying with all applicable statutes, laws, and regulations applicable to your restaurant(s). You are also exclusively responsible for all employment related matters in your restaurant(s) and exercise complete control over the work, working conditions, and terms and conditions of employment for employees in your restaurants. The guidelines in this booklet with respect to employment related matters are informational only and should not be construed as establishing requirements applicable to any Owner Operator." Buttressing these statements. the following guidance is provided to business consultants on the first page of the People Review: To Business Consultants: ... Owner Operators are independent employers \vho make their own decisions regarding employment related policies and procedures applicable to the employees who work in their restaurant(s). The People Review portion of the Operations Review is a consulting visit designed to help the O\\lner Operator maximize their investment in people. It is not intended to be used as a checklist or interview. nor is it intended to be an opportunity to tell the Owner Operator how to manage their employees or how to run their restaurant. ... You must never require or demand an Owner Operator to use a particular McDonald's policy or practice. You must always remember that any decision to change people policies or practices rests solely in an owner operated restaurant with the independent O\vner Operator . . . . [P]lease refrain from discussing or providing any advice of

issues and attorneys of the Owner Operator's own choosing and not from their Business Consultant.

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May 22, 2014 Page 11 At our meeting on April 25th, the General Counsel inquired why business consultants ask franchisees if they are using Hiring to Win, WOW orientation, and other optional tools if those tools are not mandatory. The questions that address these topics on the People Review are not focused on whether the franchisee uses a particular tool (e.g., Hiring to Win, WOW orientation, etc.). but rather whether the franchisee has considered whether it has an effective people practice of that type in place (e.g., an effective hiring system. an effective orientation program, etc.). For example, the People Review seeks a yes or no response to the statement, "[t]he restaurant is using an effective hiring process (e.g .. Hiring to Win) to consistently select high-quality, guestfocused Crew, Crew Trainer, and Manager employees." Another question seeks a yes or no response to the statement, ''[t]he restaurant has a comprehensive and consistent Crew orientation process in place that is supported by follow up orientations (e.g., the National Crew WOW Orientation material)." The People Review is designed to make the owner-operator evaluate whether he/she can improve people practices that may drive business results. It is not used to codetermine what those practices will be. McDonald's HR Consulting Hotline Does Not Advise or Direct NonManagement Employees of Franchisees. Like most major U.S. companies, McDonald's operates an HR Consulting hotline. All McDonald's employees are provided the HR Consulting hotline number. Upon receiving a call, the HR Consultant who answers the hotline call requests the caller's employee ID to verify whether the caller is an employee of McDonald's or a franchisee. If the caller is a nonmanagement employee of a franchisee, the HR Consultant is instructed to explain that McDonald's is not his/her employer and the caller should address the matter with the franchisee. McDonald's does not provide direction or advice to non-management employees of its franchisees. At our meeting, the General Counsel inquired what McDonald's would do if a franchisee was engaging in obvious race discrimination. In addition, he asked whether McDonald's would remedy the violation. McDonald's is aware of situations where franchisees were alleged to have violated wage and hour laws and/or immigration laws. and McDonald's has neither investigated the allegations nor taken actions with regard to the franchisee's employees in response to the allegations. As the franchise agreement makes clear. franchisees themselves are responsible for complying with applicable laws. also are solely responsible for remedying violations of at

Franchisees Can Subscribe. As noted above in section Il(A), the vast majority of franchisees use an ISP - in essence the back ot1ice hard-drive of the restaurant that collects and stores the operational and sales data

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May 22. 2014 Page 12 for the restaurant. The Regional Restaurant Data Diagnostic ("R2D2") is a data collection tool and reporting service. R2D2 sits on the ISP in order to compile ISP data and process it for use in creating specific reports about the restaurant's operations. which may help the franchisee reach its business objectives. A franchisee can choose to subscribe to R2D2 and pay an annual fee (around $125 per year, per restaurant), which allows the franchisee to select up to 40-50 reports of its choice to receive through R2D2. At our April 25th meeting, the General Counsel inquired whether McDonald's has access to data gathered from the franchisee· s ISP and, if so, how it is used. McDonald's does indeed have access to reports and data formatted by R2D2, and for good reason. McDonald's needs access to sales data, customer counts, inventory, food costs, and similar information to evaluate the health of the franchisee's business and analyze such data in the aggregate on a market, regional, divisional, and national basis. As a franchisor whose business goal is to drive sales and a stronger brand. McDonald's has - and needs - access to operational information from its franchisees' restaurants for understandable and necessary business purposes. As noted above, the ISP also contains information concerning employees and scheduling. Similarly, among the many reports R2D2 provides are reports concerning labor hours and labor costs at the restaurant over particular time periods. Because McDonald's has access to R2D2, it has access to these types of reports as well. But implicit in the General Counsel's question is the notion that if McDonald's has access to such data, it therefore must use the data to co-determine hours and the scheduling of employees. That assumption is without basis and false. McDonald's does not use R2D2 data to codetermine schedules, hours, or any terms and conditions of employment for franchisees' employees. McDonald's leaves the determination of those employees' wages, hours, and working conditions to each franchise owner. Moreover, because McDonald's does not profit from reducing labor costs at its franchisees' restaurants, it has no financial incentive to use the data for this purpose. McDonald's franchises roughly 3,000 approved franchisees in the United States - are successful business people from a wide variety of diverse backgrounds who have invested significant time, effort, and financial resources in establishing and building their businesses. :\JkDonald's works side by side with these franchisees to create strong and to to owners restaurants. on day basis. There is no basis to conclude that because McDonald's has access to a broad range of operational information concerning a particular restaurant, including employee information. that it uses that information to direct a franchisee to set certain hours. wages, schedules, or staff complements, or otherwise control labor matters at that restaurant. Because the joint employer analysis focuses on the actual control the putative joint employer exercises over the employees of rPCf'>Pi''f

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May 22, 2014 Page 13 the primary employer, McDonald's mere access to franchisee's ISP data is insufficient to establish a joint employer relationship as a matter of established Board law. See AA;/ Property Holding Corp., 350 NLRB 998, 1000 (2007) ("In assessing whether a joint employer relationship exists, the Board does not rely merely on the existence of ... contractual provisions, but rather looks to the actual practice of the parties"); TLl Inc., 271 NLRB 798, 798-799 (1984) (employer's actual role in supervising and directing employees insufficient to establish joint employer relationship despite provision in lease agreement that employer would maintain --operational control, direction, and supervision" of employees). G.

McDonald's Provides Limited Direct Training to Management Emplovees oflts Franchisees.

The General Counsel requested that McDonald's provide further detail on what training it requires of its franchisees' employees. Pursuant to the franchise agreement, McDonald's requires that the franchise owner and at least one manager at every franchise restaurant be Hamburger University certified (although the franchise owner may be that restaurant manager if he owns only one restaurant). Further, McDonald's requires that each shift be staffed by a shiftcertified manager that has completed food safety training. Determining what training to provide its crew members and other non-management employees - including how to cook food in conformity with McDonald's standards, how to use restaurant systems such as the POS system, and how to serve customers - is solely within a franchisees' discretion. McDonald's has no authority to require franchisees' non-management employees to participate in training provided by McDonald's and does not do so. This minimal amount of required management training - perfectly standard in the franchise context- does not support a joint employer finding. 9 Indeed, in a recent Advice Memorandum, the Division found that franchisees of SuperShuttle were independent contractors because, inter alia, the franchisor did not exercise "significant control over the manner and means of the [franchisees'] work," a degree of control test similar to that used in the joint employer analysis. Division of Advice Memorandum, SuperShuttle Los Angeles. Inc. (May 23, 2013 ). The Division concluded that SuperShuttle provided direct training to franchisees' employees:' but despite this finding, the Division held that the franchisees were not employees of SuperShuttle because they enjoyed "significant operational freedom". The same conclusion is to

9

··Typically. a franchisor imposes systemwide standards by means of the franchise agreement between the parties that establishes uniform specifications with regard to ... training requirements ... Shelley & Morton, supra note 6. at 121.

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III.

McDonald's Lack of Control over Its Franchisees' Labor Relations Is Distinguishable from the Relationship in Browning-Ferris, Case No. 32-RC-109684, in Which the Board Has Invited Briefs on Whether to Revisit Its Current Joint Employer Standard.

On May 12, 2014, the Board issued a Notice and Invitation to File Briefs in BrowningFerris Industries ofCal!fornia, Inc., DIB!A BF! Newby Island Recyclery and FPR-Jl, LLC, D!B/A Leadpoint Business Services and Sanitary Truck Drivers and Helpers Local 350. International Brotherhood of Teamsters, 32-RC-109684, a case in which the Board may revisit the current standard for a joint employer relationship. In that case, the Regional Director, applying the current Board standard, found no joint employer relationship between BFI and Leadpoint. A review of some of the key facts in that case demonstrates just how far removed the relationship between McDonald's and its franchisees is from any possible joint employer finding, even if the standard is revisited: •

Direct Control Over Wage Rates. The contractual agreement between Leadpoint and BFI provides that Leadpoint cannot raise its employees' wage rates in excess of the wages BFI pays for full-time employees who perform the same work without first obtaining BFI' s consent. This degree of control over wages is totally absent from McDonald's relationship with its franchisees. McDonald's has no control over the wages paid by its franchisees to its franchisees' employees.

•

Direct Control Over Personnel Decisions. The staffing agreement in BrowningFerris provides that BFI "maintains the right to reject or discontinue the use of any Personnel." McDonald's, in contrast, has no authority to reject or terminate the employment of any franchisee employee or to require its franchisees to reject or terminate any employee, either.

•

Direct Control Over Station Assignments and Emplovee Productivity. BFI maintains productivity standards for the lines that Leadpoint's employees operate. BFI employees, who are present at the facility, can start and stop the lines and alter their pace as they see fit. Aside from infrequent consulting visits, McDonald's business consultants are not physically present at franchisee restaurants on a day-to-day basis and, even when they are present from time to time, they have no authority to require to start or work or the pace their work.

•

BFI determines how many lines to run at facility and how many employees should man each line. McDonald's does not require franchisees to have a specific number of employees at specific stations. Those decisions remain with the franchisee.

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May 22, 2014 Page 15 •

Direct Control Over Overtime. BFI solely determines whether and how much overtime is needed for Leadpoint's employees. In contrast. McDonald's has no role in determining the amount of overtime worked by its franchisees' employees.

Despite finding each of these key facts in Browning-Ferris, the Regional Director of Region 32 concluded that BFI was not a joint employer of Leadpoint's employees. By requesting briefs on whether (and if so, how) the Board should revise the current standard for determining a joint employer relationship, the Board implicitly acknowledges that the Regional Director's decision in Browning-Ferris is correct under current Board law. If BFI is not a joint employer given each of the key facts above, McDonald's certainly is not. And because the Division provides legal advice based on Board law as it currently stands, the Division cannot find McDonald's to be a joint employer of its franchisees' employees here. See NLRB Rules and Regulations 201.2.1 ("The Associate General Counsel for Advice is responsible for legal research on and analysis of broad areas of labor law administration [and] for legal advice to Regional Directors on all unfair labor practice cases involving novel or difficult legal issues ... ."). Moreover, even if the Board in Browning-Ferris expands the standard for determining a joint employer relationship, the key factual differences discussed above establish that McDonald's would not be a joint employer of its franchisees' employees under any new standard suggested by the Browning-Ferris facts.

IV.

Although McDonald's Is Not a Joint Employer with Its Franchisees, the Board Does Not Need to Decide the Joint-Employer Issue Now.

Currently, there are over 50 unfair labor practice charges pending in 11 different Regions that allege McDonald's is a joint employer of its franchisees' employees. We do not believe the Division must resolve the question of joint employment outright, but should instead direct the Regions to resolve unfair labor practice charges without proceeding to complaint on the question of joint employment. By not including joint employer allegations in complaints, meritorious unfair labor practice charges will either go to trial on the merits or, given the nature of many of the allegations. more likely be settled. If violations are found, individual franchisees are fully capable ofremedying those violations and are obligated to do so. Therefore, McDonald's is not needed to effectuate the purposes of the Act with respect to these matters. Further, in the event a petition is filed and a union is certified at a particular franchisee's restaurant, only the franchisee would bargain with the union over terms and conditions of employment because it is the ~0LU~,,0 to not McDonald's. hand. and as we explained at our to of Advice. joint employer allegations in any complaint will force McDonald's to litigate each matter to conclusion because of the critical centrality of this issue to McDonald's business. Moreover. McDonald's will have to litigate every case because the joint employer analysis is highly fact-intensive and the key facts differ from franchised restaurant to franchised restaurant.

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May 22, 2014 Page 16

See Grass Valley Grocery Outlet, 332 NLRB 1449 (2000) (explaining that evidence of a singleemployer relationship between a franchisor and one franchisee does not indicate a singleemployer relationship between the franchisor and any other franchisee); Southern California Gas Co., 302 NLRB 456 (1991) (finding no joint employment relationship and stating, ·'the question of joint employer status must be decided upon the totality of the facts of the particular case."); Cabot Corp., 223 NLRB 1388, 1388 (1976) (same). We are hopeful that this supplemental submission, together with the information provided in our earlier submission to the Division of Advice and our position statements submitted to the Region, contain sufficient information for you to either direct the Regions not to proceed to complaint on the question ofjoint employment or rule explicitly that McDonald's is not a joint employer with its franchisees under the Act. We will make ourselves available to meet with you again if open issues still remain and you believe we can be of further assistance. Please do not hesitate to contact me to discuss this information or any additional questions you may have.

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Willis J.

cc:

Rob Liddle, Esq., McDonald's Corporation Doreen Davis, Esq., Jones Day Jonathan Linas, Esq., Jones Day

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