McDonald’s Turns Stomachs In Latin America And Europe

February 27, 2015

Widespread and sustained worker protests decrying unlivable low wages, as well as ugly allegations of racist management, have already cast significant tarnish on the “Golden Arches”  here at home in the United States. Now, however, it appears as though many in South America and Europe, too, are getting fed up with McDonald’s and its business practices.

Here’s what’s happening:

In Brazil, a coalition of nine unions, including the three largest union federations in the country, filed a major lawsuit earlier this week alleging widespread and systematic labor violations over three decades. The violations amount to the anti-competitive behavior known as "social dumping," because they give McDonald's an unfair advantage over companies that comply with the law, Reuters reported. 

The Brazilian unions behind the lawsuit are demanding that McDonald's be prohibited from opening new stores in the country until the company comes into full compliance with local labor law, according to a Guardian report. Under Brazilian labor law, McDonald’s could also face fines amounting to up to 30 percent of the company’s annual sales. Ricardo Patah, president of UGT, or general workers union, told the Financial Times that McDonald’s operated in Brazil as if the South American nation was a “country of savages." He continued, “We will do everything that can be done to stop companies coming to our country, violating labor laws and taking the profits out of our nation."

According to the Wall Street Journal, the violations include "paying less than the minimum wage, not paying for overtime hours worked, not permitting workers to take legally required breaks and failing to make the legally required extra payments for work considered dangerous under Brazilian law." The systematic violations of Brazilian labor law occurred over three decades, continuing through 2014, despite legal rulings calling on McDonald’s to respect and comply with Brazilian law, including more than a dozen consent decrees signed by McDonald’s through its agent, Arcos Dorados, as well as a consent decree covering the entire country reached with a prosecutor in Pernambuco.

The Sao Paolo newspaper Estadao reported Wednesday that the Ministry of Labor in the state of Pernambuco announced the formation of task force to investigate McDonald's labor practices, promising to examine the company with a "fine-tooth comb." 

And in Europe, Reuters reported that a coalition of major European trade unions has called for the European Commission and European Parliament to investigate McDonald’s after a report released finds that the company has deliberately avoided more than 1 billion euros in corporate taxes across Europe from 2009-2013.

With McDonald’s now facing heat from EU authorities, the Financial Times wrote that “McDonald’s has been linked to the growing scandal of tax avoidance within the EU,” placing the company under intense scrutiny as the EU proceeds with a “crackdown” on corporate tax dodging.

With sales lagging in the United States, Latin America and Europe are both major strategic markets for McDonald’s. Sales in Brazil are responsible for nearly half of McDonald’s total revenue in Latin America, making it the company’s most important growth market. Meanwhile, McDonald’s European division – its second-largest market globally – accounts for nearly 40 percent of the company’s operating income. 

February 26, 2015

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