McDonald's Corporation (MCD, Financial) is under the knife for faulty equipment and poor safety standards. McDonald employees from nineteen U.S. Cities have complained of burns received from fryer oil and hot grills. The employees are charging the fast food franchise of wage theft, besides poor working conditions. Besides, they allege that McDonalds squashed their efforts to unionize along with racial discrimination charges. Some of the complaints came from cities including Kansas City, New Orleans, New York, Miramar, Philadelphia, etc. Not only are these complaints against McDonald franchisees , but also against 9 restaurants run by McDonald Corp itself. The U.S. Occupational Safety and Health Administration (OSHA) have received twenty-eight complaints for far.
The burning issue
Employees suffer various degrees of burns due to less staff and pressure from higher authorities to increase efficiency. Besides, no formal training in handling grease and oil is given to them, the employees stated. Some say that grease aprons are not available, while some say that they have no choice but to clean the grill while its on since the cooling process is time-consuming. One-third of the total employees have also alleged that the first aid kits located at the store is empty, incomplete or not accessible at all. Employees at franchised locations have alleged that they are denied their overtime payment and breaks. Not only this, but McDonald's is in troubled waters for not providing protective equipment. What may be shocking is that one in five employees are burnt due to missing or damaged protective equipment. Employees have stated that the fast-food giant have told them to cure their burns with cool mustard, mayonnaise, butter, or ketchup. These complaints come heels after the $15 campaign wherein employees are demanding $15 wage rate per hour. If this pay rate is implemented, worker negotiations and unionization will be facilitated.
The OSHA is in the process of investigating and six claims have already been reviewed. The time frame to complete the investigations is six months, within which decisions to fine have to be taken. In case any allegation turns out to be true, a fine of $70,000 will be imposed per charge based on the severity of the violation.
McDonald’s speaks on such allegations
A spokeswoman for the company said McDonalds would review the allegations being made. The company's spokeswoman Heidi Barker Sa Shekhem said that the company is committed in providing a safe working environment. However, these complaints are an evil gimmick of activists trying to defame the company, she said. Also, these allegations may also be based on generating a huge media coverage, the spokeswoman said in her statement. As if these complaints of working conditions are not enough, the company has also faced the heat of a racial-discrimination lawsuit along with issues of avoiding taxes. However, McDonald refuted both these claims. Now that this new problem has surfaced, employees may receive higher wages, along with unionization power if things work in their favor.
Looking forward
What may be not important, is the effect of these complaints on consumers. However, investors have a reason to fret. The company reported a $1.22 EPS for the fiscal quarter end December 2014. According to Zacks Investment Research, estimated consensus EPS was $1.2. The company has to yet declare their 2014-yearly earning report. The third quarter 2014 saw nearly a 3% decrease in U.S. sales. The net income for that quarter fell to $1.07 billion, from $1.52 in the same period in 2013. The world's largest fast food chain of hamburgers, has 35,600 outlets, out of which 81% are franchisees. Now that the complaints have popped up, investors might be a little worried as the issue is no longer about the decline in U.S. sales. The question is now about the brand’s withering reputation.
