Restaurants

McDonald's wins praise for firing its CEO but reignites scrutiny over worker complaints

Key Points
  • McDonald's board fired CEO Steve Easterbrook for having a consensual relationship with an employee, a violation of the company's non-fraternization policy.
  • While the decision is being praised, it is also reigniting scrutiny of the company's handling of sexual harassment allegations.
  • McDonald's workers have filed more than 50 complaints with the Equal Employment Opportunity Commission for incidents that involved sexual harassment, abuse and retaliation.
Steve Easterbrook, CEO McDonald, poses with Ronald McDonald.
Getty Images

McDonald's is garnering praise after deciding to fire its chief executive for having a relationship with an employee.

But the decision is reigniting scrutiny of the company's handling of sexual harassment incidents that involve restaurant workers.

The Chicago-based company announced on Sunday that its board ousted CEO Steve Easterbrook for having a consensual relationship with an employee, a violation of the company's non-fraternization policy.

"I think the board is acting decisively, showing leadership and setting an example to local franchise owners that the knives are out, and this kind of behavior is not going to be tolerated on any level," Eric Schiffer, chief executive of Reputation Management Consultants, said.

Easterbrook's severance package could be worth as much as $41.8 million, according to analysis by Equilar. His departure is part of broader trend, spurred on by the #MeToo Movement, that has led employers to reexamine how they handle workplace relationships that involve power imbalances.

"These days, what we find is boards are more worried about reputational risk, and they're taking more action and acting more promptly," said Davia Temin, the CEO of management consultancy Temin and Company.

McDonald's Chief People Officer David Fairhurst, who headed the chain's human resources department, departed the company on Monday.

Chris Kempczinski, who previously served as president of McDonald's U.S. division, is the company's new chief executive. During his tenure as the head of the company's most important segment, McDonald's workers have filed more than 50 complaints with the Equal Employment Opportunity Commission for incidents that involved sexual harassment, abuse and retaliation.

"It's clear McDonald's culture is rotten from top to bottom. McDonald's needs to sit down with worker-survivors and put them at the center of any solution," the Fight for $15 and a Union, a fast-food workers' coalition, said in a statement. "And the company needs to be completely transparent about Easterbrook's firing and any other executive departures related to these issues."

And while Easterbrook is leaving with a severance package despite being ousted, cashiers and cooks who have filed sexual harassment complaints allege that they have been fired or forced to quit – without a parachute in sight.

McDonald's, for its part, has said that it has taken steps to address sexual harassment, abuse and retaliation.

After the latest wave of sexual harassment complaints were filed in May, Easterbrook wrote a letter viewed by CNBC that said McDonald's started working with RAINN, the nation's largest anti-sexual violence organization, a year ago to enhance its policies. The company also created a hotline for workers to anonymously report sexual harassment.

In August, McDonald's announced that it would introduce new workplace training for restaurant workers and supervisors centered on harassment and workplace safety.

"Simply giving sexual harassment training is not sufficient," Temin said, citing studies that have shown that men can be less sympathetic to victims after receiving training.

McDonald's role as a franchisor

In court, McDonald's has argued that it is not a "joint employer," which means that it cannot be held liable for violations by franchisees. Under that designation, the company would also not be required to bargain with restaurant workers at franchised locations if they unionized. Franchisees run about 93% of U.S. locations.

In October, a federal appeals court sided with McDonald's in a case about underpaying wages.

But the nation's biggest burger chain could require more from its operators, according to Debra Katz, a Washington, D.C.-based attorney who handles sexual harassment cases at Katz, Marshall and Banks.

"Even with franchisees, the terms and conditions of how the franchise is run could require every McDonald's restaurant to adopt reasonable policies to address sexual harassment," Katz said.

Temin said that McDonald's should put "carrots, sticks and nudges" in place for its franchisees, like a zero-tolerance policy for retribution for reporting sexual harassment and rewards for going a certain period of time without a report.

McDonald's did not immediately respond to a request for comment from CNBC.

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