McDonald’s joins Wal-Mart in boosting wages

The wage and benefit increases McDonald’s announced on April 1 put the fast-food giant on the same path retailer Wal-Mart took in February when it announced an increase in its starting wage.

McDonald’s announced that beginning July 1, it will raise starting pay at company-owned restaurants to $1 over the locally mandated minimum wage. Full- and part-time workers at company-owned restaurants who have at least one year of service also will begin accruing paid time off. And workers at both company-owned and franchised restaurants will see expanded educational opportunities.

The company says the wage and time-off benefits will affect more than 90,000 workers at about 10 percent of McDonald’s restaurants nationwide.

The company’s announcement refers to its franchised outlets as “independently owned,” and it makes clear that pay and benefit decisions of those restaurants are left up to the owners.

The distinction between company-owned and franchised restaurants is likely significant, according to Brian J. Kurtz, an attorney with FordHarrison LLP in Chicago and an editor of Illinois Employment Law Letter. In December 2014, the National Labor Relations Board (NLRB) named McDonald’s a “joint employer” of workers at its franchised restaurants, a position the company strongly disputes. As a joint employer with its franchisees, the company would share liability for violations of the National Labor Relations Act (NLRA).

“I think the company wants to be very clear that this wage adjustment applies only to its corporate-owned stores and that it is not requiring, suggesting, directing, etc., its franchisees to follow suit,” Kurtz said.

“We’ve been working on a comprehensive benefits package for our employees—the people who bring our brand to life for customers every day in our U.S. restaurants,” McDonald’s President and CEO Steve Easterbrook said of the company’s actions. “We’ve listened to our employees and learned that—in addition to increased wages—paid personal leave and financial assistance for completing their education would make a real difference in their careers and lives.”

By the end of 2016, McDonald’s projects that the average hourly wage rate for employees at company-owned restaurants will be in excess of $10. The company’s announcement pointed out that more than 3,100 McDonald’s franchisees make their own decisions on pay and benefits.

The McDonald’s decision appears to be “part of a broader move among large employers with low-wage employees (e.g., Wal-Mart, Target, etc.) to increase wages,” according to Steven L. Brenneman, an attorney with Fox, Swibel, Levin & Carroll, LLP in Chicago and an editor of Illinois Employment Law Letter. “It appears this is being done due to market forces and perhaps also in response to widespread pressure by employee advocacy groups for a ‘living wage.’”

The McDonald’s news follows a wage-increase announcement by Wal-Mart on February 19 that it would raise hourly pay for 500,000 workers to at least $9 an hour in April. Then by February 2016, current associates will earn at least $10 an hour, according to a statement from Wal-Mart CEO Doug McMillon.

Both wage announcements come ahead of a new round of strikes by fast-food and other traditionally low-wage workers set for April 15. The new protests are part of an effort that has produced periodic strikes for several years.

Mary Kay Henry, president of the Service Employees International Union (SEIU), credited her union and others involved in the fight to raise wages for influencing the Wal-Mart and McDonald’s actions. But she also said the changes aren’t enough.

“Today, workers proved that by joining together, they can improve their lives,” Henry said. “Fast-food workers—joined by adjunct professors as well as Wal-Mart, home care and child care workers and airport staff—raised their voices and have built a movement. Workers got into this fight to improve their lives—not for wage announcements.”

“McDonald’s was forced to pay up, but it’s not nearly enough,” Henry said. “The overwhelming majority of McDonald’s workers will still be paid wages so low that they can’t afford basics like rent and groceries.”