Tag Archives: McDonald’s joint-employer ruling

Debut of Politico’s ‘Morning Shift’ Raises Ethical Questions Around IFA Sponsorship

by Arun Gupta In These Times October 14, 2014

I was pleased to learn in late September of Politico’s plans to launch a labor reporting desk—I am of a “more the merrier” mindset when it comes to journalism, especially on a topic so underreported as labor.

Politico apparently sees money to be made in labor journalism, even as this vital beat fades in newsrooms across the country. According to the Huffington Post, “Politico’s market research suggested that stakeholders in government, lobbying and Fortune 500 companies were looking for the ‘nitty-gritty’ details of labor policy.” “Labor and Workplace Policy” will join Politico’s portfolio of 13 other “Pro Verticals,” paywall-protected sections that cover single topics like education, transportation, technology and the military. Subscriptions to the verticals can run into the thousands of dollars, the HuffPost says.

It’s an important service, even if Politico’s focus sounds less like traditional labor reporting (on topics like organizing campaigns and contract negotiations) and more business-oriented: The site promises to cover “developments at [the] Department of Labor and NRLB [sic], as well as intelligence on unions, immigration, minimum wage, unemployment, retirement, pensions and pay, health care and ACA implementation, workforce training and court cases.”

Politico has retained top-notch talent in veteran reporter and editor Timothy Noah, author of The Great Divergence, and outstanding labor reporter Mike Elk, who wrote for In These Times from 2010 to 2014. (Elk was involved in a successful unionizing effort at In These Times with the Communications Workers of America and fought the layoffs of staff writers, including himself, whose yearlong positions were funded by a one-year grant that was not renewed.)

However, the Politico labor vertical made a curious decision in its first week. Its newsletter, “Morning Shift,” debuted October 7 with the tagline, “Your daily speed read on labor and employment policy” and a sponsorship from the International Franchise Association—a trade group representing franchised businesses like McDonald’s and Domino’s Pizza, as well as their franchise owners . Two days later, Morning Shift covered a labor issue of enormous importance to the IFA— whether McDonald’s has a legal responsibility for working conditions in franchises—but never mentioned the sponsor’s stake in the story, and editorialized in a way that could give the appearance of favoring the IFA’s position.

The subject line of the October 9 email edition began, “Morning Shift, presented by The International Franchise Association.” After an exclusive about a possible new president of the Communications Workers of America and a dig at Grover Norquist about plans for his “next union-busting ground game,” an ad appeared in the middle of the text, as is commonplace for IFA verticals. This one read: 

A message from The International Franchise Association. The franchising industry includes more than 770,000 establishments and employ 8.5 million workers in the United States. Learn how the franchise business model works and the positive impact franchising has on America’s economy by visiting www.franchisefacts.org.

I clicked on the IFA link. The website says, “Small franchise businesses are the key to the American economy.” After a video touting the benefits of franchising like “picking your staff and choosing which benefits to provide at your location” as health, vision and dental icons pop up, the site unleashes a thinly veiled attack on the effort by the Service Employees International Union (SEIU) to organize low-wage fast-food workers.

America’s 770,000 franchise small businesses are under attack by labor special interest groups—hurting workers, small business owners, communities, and our nation’s economy.

FIGHT FOR WORKERS AND SMALL FRANCHISE BUSINESSES

That a labor report would be sponsored by a trade association for a sector where unions and workplace rights are virtually nonexistent and wage theft and poverty is rampant gave me pause. The Morning Shift is supposed to be nonpartisan, according to the Huffington Post. That’s possible, given that law firms, unions, lobbyists and Fortune 500 companies will be among the likely subscribers, and they might see a partisan bias as compromising the accuracy of the information and analysis.

Still, a sponsor with a vested interest in how information is reported can create serious conflicts of interest. Politico could be more transparent about the possibility of such a conflict if it noted IFA’s involvement in the McDonald’s story—which it never does. Further, at times, the Morning Shift appears to slant its reporting toward IFA in the October 9 Morning Shift report.

The item in question is a three-paragraph “NLRB Update.” Since November 2012, when SEIU unveiled its fast-food organizing campaign, 181 complaints by workers involving unfair labor practice charges such as wage theft have been filed with the NLRB Office of the General Counsel against McDonald’s. Another seven class-action suits covering tens of thousands of workers have been filed in federal courts claiming McDonald’s Corporation conspires with its franchisees to engage in systematic wage theft. SEIU wants the NLRB to rule McDonald’s and its franchises have “joint responsibility” for employees.

As I’ve reported, 90 percent of McDonald’s 14,000 U.S. restaurants are franchises. Franchisees usually sign a “master contract” with the corporate parent, which, as I wrote, “micromanages key aspects of the business—menus, promotions, insurance, software, advertising, cleaning and so on. At the same time, McDonald’s takes pains to spell out in contracts that it has ‘no implied employment relationship’ with a franchisee or their workers. SEIU aims to hold corporations liable for their franchises’ actions.” A joint-employer ruling could allow SEIU to unionize workers or improve wages, benefits and conditions across thousands of stores at once instead of fighting one franchisee at a time.

SEIU scored a major victory in July when the NLRB general counsel ruled in favor of McDonald’s workers in 43 cases and “authorized complaints on alleged violations of the National Labor Relations Act.” The general counsel explained that if the parties cannot reach a settlement, “complaints will issue and McDonald’s, USA, LLC will be named as a joint employer respondent.”

The International Franchise Association makes no bones about the fact that this is a doomsday scenario. At an IFA-sponsored conference, Aziz Hashim, President and CEO of NRD Holdings, which owns numerous franchises such as Popeye’s and Dominos, said the ruling “threatens the basic foundation of franchising.” If a joint-employer ruling forces McDonald’s to assume legal responsibility for employees in franchises, it could negate the rationale for franchising and become a watershed in low-wage worker organizing. The parent company would have nothing to gain from outsourcing its workforce.

Morning Shift mentioned McDonald’s liability if it lost a joint-employer ruling, but it failed to mention this downside for franchises.

The Morning Shift account also contained wording that seems slanted toward the IFA. Morning Shift stated, “If the NLRB rules against McDonald’s, the corporation could be on the hook for infractions committed by its (seldom deep-pocketed) franchisees.”

Why tell the reader franchisees are “seldom deep-pocketed”? That’s in line with IFA talking points implying franchisees are struggling small businesses. I’m sure if I asked the IFA to speak to a franchisee, it could quickly trot out a scrappy immigrant family who’s saved every tarnished penny to buy a struggling franchise they devote every waking hour to for their slice of the American Dream, but that’s arguably not the norm.

It’s true that 64 percent of franchise owners are single-outlet operators, but they do not make up the bulk of the business: Of some 60,000 fast-food franchise outlets, 75 percent are owned by “the big players,” as the the Wall Street Journal puts it. The Journal adds that the average McDonald’s franchise “owns more than six locations.” In the fast-food industry, the biggest franchisees are holding companies with hundreds of outlets and half-a-billion dollars a year in revenue—and it’s these mega franchisers who stand to gain the most if the NLRB eventually decides against the workers. As the Journal further explains, corporate parents tend to pass over unknown entrepreneurs—even those that can pony up the $750,000 “minimum” generally required for a McDonald’s franchise. The parent prefers mammoth franchisees because,  “They often have readier access to capital and can prop up underperforming restaurants with stronger sales elsewhere in the chain. They’re also seen as less risky by franchisers, because they have a track record with a brand.”

Thus, for many fast food franchises, owners’ pockets are plenty deep. It’s spin for the IFA to portray itself as the defender of workers and small business owners. It’s a questionable assertion for Morning Shift to make, and one that indicates a certain slant.

Politico also editorializes by describing the NLRB’s ruling as “controversial,” writing, “NLRB general counsel Richard F. Griffin issued a controversial finding in July naming McDonald’s a joint employer in 43 cases before the NLRB.” But legal cases are, by definition, controversial—one side disagrees with the other. For whom was the NLRB ruling controversial? Certainly for parties with a stake, such as McDonald’s, the IFA, the franchisees, and their allies in Congress. But it would be a stretch to say it was a topic of significant national debate.

In addition to slant, a major question here is disclosure. Typically sponsorship disclosures are necessary when a sponsor is mentioned in a story. In this case, since the IFA’s sponsorship is already prominently highlighted, the question is reversed: Is the sponsor’s role in the story significant enough that it deserves a mention?

The IFA has emerged as a major player in the NLRB fight over franchising. An Associated Press report from July 30 published on Politico singled out the IFA as an opponent of the NLRB ruling: “The International Franchise Association, which represents franchisees, has opposed the identification of McDonald’s as a joint employer.” On September 16, The Hill reported the IFA was spearheading the “strategy to overturn a preliminary NLRB decision that corporations like McDonald’s share joint employer status with their franchisees.” The industry group’s plan included dispatching hundreds of franchisees and franchisors “to flood lawmakers’ offices, pressing them to oppose the NLRB’s finding.” In mid-September, IFA held its annual conference in Washington, D.C., attended by some 360 franchise industry representatives, “to make sure the model stays intact,” according to Entrepreneur magazine. One conference attendee said, “This joint employee-employer thing, if that goes through, that’s a hand grenade in the middle of the [franchising] business model.”

There is no inkling of this organized campaign in the October 9 report. What makes the omission even more puzzling is that the same Morning Shift mentions the IFA in relation to its lawsuit trying to overturn Seattle’s $15-an-hour minimum wage law that was approved by the City Council in June.

It’s important to point out there is no evidence the news was intentionally slanted. Politico’s labor desk is best able to say if there was any coercion or signals from higher ups at Politico to favor the IFA. At the very least, it raises a number of questions about Politico’s sponsorship and disclosure policies.

Politico is not alone in facing these questions. Journalists have long been wary of being pressured into writing “advertiser-friendly” copy; to protect the integrity and independence of their reporting, many outlets, such as the New York Times, have an ethics policy that keeps the advertising and news departments “strictly separate.” But the decline of print-media business models combined with the explosion of data-rich digital media is erasing those lines. Last year, The Atlantic was lambasted for sticking “sponsor content” from the Church of Scientology in its center news column. More recently, former Vice Media editor Charles Davis went public with evidence that the wildly successful website has killed stories out of fear it may potentially affect a “business deal” with a powerful brand, the NFL.

Having run several media outlets with different funding models, I know well the pressure and conflicts involved with taking advertising money. That’s why even the appearance of favoritism needs to be guarded against. Ultimately, the most valuable asset any reputable media outlet ultimately has is not its market value, but the trust with its readership. As a reader of In These Times, I know it receives sponsorship for its labor coverage from unions, including the International Association of Machinists and the United Auto Workers However, In These Times has published numerous critical reports by Elk on the UAW’s failed attempt to unionize a Volkswagen plant in Tennessee earlier this year, as well as a recent piece by David Moberg critical of the union’s claims to have eliminated two-tier contracts at an Indiana auto plant.

In this second Gilded Age, when corporate influence is everywhere, including journalism, much rides on providing proper context and analysis, and nowhere more than the fight over who controls the economy.

The CWA, UAW and IAM are sponsors of In These Times. Sponsors have no role in editorial content.

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