The 5 W's

A Labor Standard That Could Affect 4.6 Million Franchise Employees – But Almost No One Is Talking About It

Published: May 17, 2026
By: Zeeshan Khan
Reading time: 9 minutes
Category: Labor / Employment Law

WASHINGTON – May 17, 2026 – A major change in U.S. labor policy took effect in late February, yet it has received almost no mainstream media attention. The National Labor Relations Board (NLRB) reinstated a stricter joint-employer rule on February 27, 2026, making it significantly harder for franchise workers, subcontractors, and temporary staff to hold multiple companies responsible for workplace violations . The rule affects an estimated 4.6 million franchise employees in the United States, but most Americans – including many of those workers – have never heard of it.

The Essentials: Who, What, When, Where, Why, How

Who: The parties involved are the National Labor Relations Board (NLRB), a five-member independent federal agency; franchise companies including McDonald’s, Burger King, and 7-Eleven; approximately 4.6 million franchise employees nationwide; labor unions including the Service Employees International Union (SEIU); and indirect employers such as staffing agencies and subcontractors.

What: The NLRB reinstated the 2020 joint-employer standard, which requires proof that an employer exercises “substantial direct and immediate control” over another company’s workers to be held jointly liable for labor violations. The rule formally withdrew a broader 2023 standard that never took effect after being struck down by a federal court .

When: The NLRB issued the final rule on February 25, 2026. It was published in the Federal Register on February 27, 2026, and became effective immediately . There was no public notice-and-comment period, which the Board justified as “ministerial” because the 2023 rule had already been vacated .

Where: The rule applies nationwide across all industries covered by the National Labor Relations Act – including fast food, retail, manufacturing, home healthcare, construction, and logistics. The rule is enforced by the NLRB’s regional offices and federal courts.

Why (Legal Dispute): The legal question centers on when a company that contracts with another business – such as a franchisor or a staffing agency client – can be held responsible for labor law violations affecting that other business’s employees. The 2023 rule (struck down by a Texas federal court in March 2024) would have held companies liable if they had “authority to control” workers, even without exercising that authority. The reinstated 2020 rule requires actual, direct, and substantial exercise of control .

How (Mechanism): The NLRB withdrew the 2023 rule via a final rulemaking published in the Federal Register. The 2026 rule reinstates the 2020 standard, which lists eight “essential terms and conditions of employment”: wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. To establish joint-employer status, a party must prove that a putative joint employer actually exercises “substantial direct and immediate control” over at least one of these eight factors on a “regular or continuous consequential basis” – not sporadically, isolatedly, or on a de minimis basis .

Case Background

The joint-employer standard has swung back and forth like a pendulum across three presidential administrations. The Obama-era NLRB adopted a broad standard in the 2015 Browning-Ferris Industries of California, Inc. decision, which held that indirect control or even unexercised authority could create joint-employer liability . That decision made it easier for unions to bargain with franchisors like McDonald’s and for workers to sue parent companies for wage violations.

The Trump administration reversed course in 2020, issuing a rule that narrowed the standard to require “substantial direct and immediate control” over essential terms of employment . This employer-friendly rule remained in effect until the Biden administration proposed a replacement.

In October 2023, the Biden-era NLRB issued a new final rule returning to the Browning-Ferris standard. That rule would have expanded joint-employer liability significantly. However, in March 2024, the U.S. District Court for the Eastern District of Texas vacated the 2023 rule, finding it was “arbitrary and capricious” and unlawfully broad . The Biden NLRB voluntarily dismissed its appeal of that decision.

With the Trump administration back in power in 2026, the NLRB (now with a Republican majority) finalized the withdrawal of the 2023 rule on February 25, 2026, formally reinstating the 2020 standard. The Board justified bypassing the normal notice-and-comment period by characterizing the action as “ministerial” – merely implementing the court’s vacatur order .

Sullivan & Cromwell LLP noted in a legal analysis that the 2026 rule “narrows the circumstances in which two or more employers may be found to be joint employers” and that indirect control or “contractually reserved authority that has never been exercised does not, on its own, establish joint employer status” .

Arguments in Favor of the Rule

Clarity for Franchise and Staffing Businesses

Supporters argue that the 2020 standard provides much-needed predictability for businesses operating in franchise, staffing, subcontracting, and other multi-entity arrangements. Under the broader 2023 standard, a franchisor could be held liable for a franchisee’s labor violations based on contract terms that gave the franchisor theoretical authority over workers – even if that authority was never actually used .

The National Law Review reported that the reinstated 2020 rule provides “greater clarity and predictability for employers, particularly those operating in franchise, staffing, subcontracting, or other arrangements involving multiple entities” . An entity that simply sets broad performance expectations or maintains contractual rights it never exercises is less likely to be found a joint employer.

Limiting Indirect and Vicarious Liability

Proponents argue that companies should not be held responsible for labor practices they do not directly control. Under the 2023 rule, a staffing agency client could be deemed a joint employer based on a contract clause giving it the right to request removal of a temporary worker – even if it never made such a request. The reinstated 2020 rule requires actual, not hypothetical, control .

The rule also clarifies that “indirect control” – such as setting project completion schedules or describing work objectives – does not, without more, establish joint-employer status. Proponents say this protects companies that outsource work legitimately from being dragged into labor disputes that rightfully belong to the direct employer.

Reducing Litigation Exposure

L&E Global, an international employment law firm, noted that the reinstated rule provides “a higher threshold for determining joint-employer status” . Supporters argue that the 2023 standard would have triggered a wave of litigation against franchisors and corporate parents, diverting resources from business operations without necessarily improving worker conditions.

Arguments Against the Rule

Weakened Accountability for Labor Violations

Opponents argue that the reinstated 2020 rule creates a loophole for large corporations to evade responsibility for labor violations committed by their franchisees or subcontractors. Under the narrow standard, a franchisor can dictate detailed operational requirements – from burger-cooking procedures to uniform standards – while claiming it does not “directly control” wage and hour practices .

Critics note that the eight “essential terms” list excludes workplace health and safety, scheduling flexibility, and other conditions that affect workers’ daily lives. Under the 2020 rule, an entity could control everything about how work is performed except the specific wage rate and still avoid joint-employer status.

Disproportionate Impact on Low-Wage Workers

The rule affects approximately 4.6 million franchise employees, who earn a median wage of approximately $11 per hour – significantly below the national average for non-franchise workers. Opponents argue that these workers are precisely the ones who need the ability to hold parent companies accountable for wage theft, unsafe conditions, and retaliation.

The Service Employees International Union (SEIU) has long argued that fast-food franchisors like McDonald’s exercise effective control over franchisees’ labor practices through detailed operations manuals, approval requirements for hiring and firing, and centralized training programs. Under the 2020 rule, this degree of control may not meet the “substantial direct and immediate” threshold if the franchisor does not directly set the hourly wage rate.

No Public Notice or Comment Period

Critics have raised procedural concerns about how the rule was reinstated. The NLRB bypassed the normal notice-and-comment process required by the Administrative Procedure Act, claiming the action was “ministerial” because the 2023 rule had already been vacated by a court .

Sullivan & Cromwell noted that the NLRB “found good cause to make repeal and replacement of the 2023 Rule effective immediately” without public input . Opponents argue that a change affecting millions of workers should not occur without transparency and public debate, regardless of the underlying court ruling.

Increased Burden of Proof on Workers

The reinstated 2020 rule places the burden of proof on the party alleging joint-employer status – typically the worker or union. Workers must affirmatively prove that the putative joint employer exercised “substantial direct and immediate control” on a “regular or continuous consequential basis.” This evidentiary burden is high, particularly for low-wage workers with limited access to legal representation or internal corporate documents .

Media Coverage and Public Awareness

Despite affecting an estimated 4.6 million franchise workers, the rule change has received minimal mainstream media coverage. The February 26, 2026, announcement was covered by legal and human resources publications including The National Law Review, SHRM, and various law firm blogs, but as of May 17, 2026, no major broadcast network (ABC, CBS, NBC, Fox) has aired a segment on the rule. It has not appeared on the front page of any national newspaper website.

Coverage in general-interest outlets has been virtually nonexistent. A search of major news databases shows that the rule change was mentioned in passing in broader labor policy articles but never as a standalone story. Labor unions representing franchise workers have issued statements to their members, but public awareness campaigns have not materialized.

Current Status

• Effective date: February 27, 2026
• Legal challenges: No immediate legal challenges reported as of May 2026
• Congressional action: None pending
• State-level alternatives: Some states, including California and New York, have their own joint-employer standards under state labor laws, which may be broader than the federal standard
• Reversal potential: A future Democratic administration could attempt to reinstate a broader standard, but the rulemaking process would take years

Why This Matters to the Average Person

If you have ever eaten at a McDonald’s, shopped at a 7-Eleven, hired a temporary worker through a staffing agency, or contracted with a home healthcare provider, the joint-employer rule affects you – whether you know it or not.

For workers: The rule determines whether you can hold a large corporation accountable when a franchise owner or subcontractor violates labor laws. Under the stricter standard, a fast-food franchisor can dictate every aspect of restaurant operations but avoid liability for wage theft if it does not directly set the hourly pay rate. For a franchise employee earning minimum wage with no paid sick leave, this distinction matters enormously.

For consumers: The rule affects the cost and quality of services you use daily. Broader joint-employer liability increases compliance costs for franchisors, which may be passed on to consumers through higher prices. Narrower liability reduces costs but may lead to more frequent labor violations by undercapitalized franchisees – particularly wage theft, which the Economic Policy Institute estimates costs U.S. workers approximately $15 billion annually.

For small business owners: The rule provides clarity for independent franchisees who want to operate without corporate interference. It also reduces the risk that a franchisor will be held vicariously liable for a franchisee’s mistakes, preserving the franchise business model that accounts for approximately 8 million U.S. jobs.

For voters: The joint-employer standard has flipped across the last three administrations. The Obama-era standard was broad. The Trump-era standard (now reinstated) is narrow. The Biden-era effort to broaden it was struck down. The rule you live under depends on who wins the next election. Understanding the stakes of this obscure-sounding legal standard is essential to understanding how labor policy is quietly made – not through legislation, but through agency rulemaking that receives almost no public attention.

Sources

• National Law Review – NLRB Issues Final Joint-Employer Rule Returning to 2020 Standard (February 26, 2026) 
• Sullivan & Cromwell LLP – NLRB Reinstates Narrower Joint-Employer Standard (March 3, 2026) 
• L&E Global – NLRB Goes Back to the Employer-Friendly Future (March 24, 2026) 
• Chartwell Law – NLRB and US DOL Issue Rulemaking on Joint Employment (March 24, 2026) 
• Federal Register – Withdrawal of 2023 Standard for Determining Joint Employer Status, 91 Fed. Reg. 9707 (February 27, 2026)
• U.S. District Court for the Eastern District of Texas – Order vacating 2023 joint-employer rule (March 2024)