New Federal Standard Makes It Harder to Hold Corporations Accountable for Franchise and Contract Workers

The “Save Local Business Act” is short, but it packs a serious punch, fundamentally changing how the federal government defines a “joint employer.” This is policy-speak for who is legally responsible for a worker when that worker is technically employed by one company (like a local franchise or a staffing agency) but takes direction from a much larger one (like the franchisor or the client company).

The New Rule: Direct, Actual, and Immediate Control

Right now, legal standards for joint employment can be complex, sometimes allowing a larger company to be held liable if they merely reserve the right to control a worker’s core terms, even if they never exercise it. This bill scraps that approach. The new, uniform standard states that a company is only a joint employer if it directly, actually, and immediately exercises significant control over the employee’s essential job terms. These essential terms are clearly defined: hiring, firing, rate of pay, benefits, day-to-day supervision, scheduling, and discipline (Sec. 2).

Think of it this way: If you work at a fast-food franchise, your corporate headquarters might have rules about the uniform and the menu, but under this bill, they only become your joint employer if they are the ones actually signing your paycheck, telling you when to show up tomorrow, and handling your performance review. Any control that is indirect, potential, or reserved in a contract is irrelevant. This strict definition applies to both the National Labor Relations Act (NLRA), which covers unionizing and unfair labor practices, and the Fair Labor Standards Act (FLSA), which covers minimum wage and overtime.

Who Benefits from the Fine Print?

The biggest beneficiaries of this change are companies that rely heavily on the franchise model, contracting, or staffing agencies. For them, this bill provides massive regulatory clarity and shields them from liability. If a local franchisee commits wage theft, or if a staffing agency client violates overtime rules, the larger parent company or client is far less likely to be dragged into court or held responsible, provided they structured their relationship to avoid that “direct, actual, and immediate” control threshold.

For the busy person, this hits home if you work for a contractor, a franchise, or in a supply chain. Say you’re a truck driver technically employed by a small logistics company, but 90% of your work is dictated by a massive retailer who tells you exactly when and where to deliver. If the retailer’s demands lead to illegal hours, this bill makes it significantly harder to sue the deep-pocketed retailer alongside your direct employer for FLSA violations. The core issue is that while the large company often sets the real-world conditions of employment, this bill ensures they can’t be held accountable for them—a major shift in liability and worker protection.