Navigating Joint Employment: A Renewed Push to Implement a More Employer-Friendly Standard

With a Republican-controlled Congress and White House, business lobbyists are seizing the opportunity to push for permanent clarity on the issue of joint employment. The International Franchise Association (IFA) is advocating for legislation that would establish a narrow standard, requiring an employer to have “direct” control over a worker’s terms of employment to be deemed a joint employer.

The Save Local Business Act is at the forefront of this effort. The proposed legislation seeks to define joint employment under both the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). The law—if enacted—would specify that a company is only considered a joint employer if it exercises “direct, actual, and immediate” control over significant aspects of employment. This approach would reduce liability for parent companies including franchisors of all kinds and gig-economy platforms like rideshare applications.

Historically, the standard for joint employment has fluctuated between presidential administrations, creating regulatory uncertainty for businesses. Under the first Trump administration, the Department of Labor (DOL) and the National Labor Relations Board (NLRB) implemented rules limiting joint employer liability. However, the Biden administration reversed these policies, favoring a broader interpretation that considered indirect or unexercised control as factors for applying the standard. This broader approach was struck down by federal courts in early 2024, leaving the regulatory landscape in limbo.

Business groups argue that the lack of a consistent joint employer standard hinders growth and complicates compliance. The constant shifts in policy make it difficult for businesses to structure their operations and workforce relationships.

The Save Local Business Act represents an attempt to bring stability to this volatile area of labor law. If passed, it would provide companies with a clearer framework and limit their exposure to potential joint employment claims. However, opposition from labor groups and Democratic lawmakers could make its passage difficult. Critics argue that a narrower standard would allow large corporations to avoid responsibility for wage violations and unfair labor practices by subcontractors and franchisees.

For businesses, this ongoing debate underscores the importance of staying informed about employment law developments. As the legal landscape shifts, consulting with experienced employment law counsel is essential to mitigate potential liabilities and ensure compliance with evolving regulations.