New Labor Rule Weakens Corporate Responsibility Over Pay Of Franchise Workers

Previously, parent companies were as much responsible as their franchisees or subcontractors to pay workers fairly.

By Rhonda FanningJanuary 15, 2020 12:57 pm,

Over the weekend the U.S. Department of Labor issued a new rule that will make it harder for employees of a franchise to sue over wage law violations. Labor Secretary Eugene Scalia argued that that the new rule was an effort to roll back what he called “intrusive regulations,” and to promote economic growth. 

Bill Beardall is director of the Transnational Worker Rights Clinic at the University of Texas School of law. He says the new rule undoes existing rules that have protected employees from not being properly paid.

“[It allows] companies to subcontract out their company’s work to subcontractors or franchisees and then to ignore wage violations that were suffered by those who performed that work,” Beardall says.

Simply put, the new regulation removes a corporation’s legal responsibility to make sure franchise and subcontract workers get paid. Formerly, a large corporation was ultimately responsible for making sure a subcontractor, franchisee or staffing agency pays the workers they hire.

Beardall says it’s important that workers be able to hold the parent companies responsible. That’s because sometimes that company doesn’t pay the franchisees enough so that they can then pay their workers, and other reasons. 


Written by Morgan Kuehler.