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Franchise Operations: Overtime Rules and Payroll Compliance (2026)
Overtime in franchises is time and one half after 40 hours on the regular rate, and the regular rate has to absorb joint employer liability and multi-entity payroll before the premium is applied. BEG runs franchise payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
The overtime rules that apply to franchises
The Department of Labor's FLSA joint employer regulation at 29 CFR Part 791 is currently marked Reserved on the eCFR, with the last change dated October 5, 2021 when the 2020 joint employer rule was rescinded. There has been no DOL joint employer regulation in force since then.
On April 23, 2026 the Department of Labor published a proposed rule to restore joint employer regulations to 29 CFR Part 791, with comments due June 22, 2026. The preamble states that neither courts nor the Department have applied the FLSA to extend joint employer status to all general contractors and franchisors.
Under the NLRB standard in force at 29 CFR 103.40, an entity is a joint employer only if it shares or codetermines essential terms and conditions of employment by possessing and exercising substantial direct and immediate control over wages, benefits, hours, hiring, discharge, discipline, supervision or direction. The 2023 NLRB rule was vacated by a federal district court on March 8, 2024, and the Board formally restored the 2020 text effective February 27, 2026 (91 FR 9707).
A worked example at franchise wages
Food service managers at the May 2025 national median of $69,390 earn about $33 an hour on a 2,080-hour year. Ten overtime hours in a week cost $500 at time and one half. If that week also carried joint employer liability, the amount folds into the regular rate first and the premium rises with it; leaving it out is the most common overtime error in this industry.
How the payroll is set up to get it right
Each pay component is flagged at setup as included in or excluded from the regular rate, hours are captured by workweek rather than pay period, and any industry exemption is applied per employee with the supporting record kept. Overtime is then arithmetic, not judgment, on every run.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- The Department of Labor's FLSA joint employer regulation at 29 CFR Part 791 is currently marked Reserved on the eCFR, with the last change dated October 5, 2021 when the 2020 joint employer rule was rescinded. There has been no DOL joint employer regulation in force since then. [29 CFR Part 791 (eCFR, as of September 10, 2026)]
- On April 23, 2026 the Department of Labor published a proposed rule to restore joint employer regulations to 29 CFR Part 791, with comments due June 22, 2026. The preamble states that neither courts nor the Department have applied the FLSA to extend joint employer status to all general contractors and franchisors. [DOL WHD proposed rule, Joint Employer Status Under the FLSA, FMLA and MSPA (April 23, 2026)]
- Under the NLRB standard in force at 29 CFR 103.40, an entity is a joint employer only if it shares or codetermines essential terms and conditions of employment by possessing and exercising substantial direct and immediate control over wages, benefits, hours, hiring, discharge, discipline, supervision or direction. The 2023 NLRB rule was vacated by a federal district court on March 8, 2024, and the Board formally restored the 2020 text effective February 27, 2026 (91 FR 9707). [NLRB, 29 CFR 103.40 (eCFR) and 91 FR 9707]
Read the full guide to how to calculate overtime pay, and the rest of the franchise payroll library.
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Frequently Asked Questions
Which franchise employees are exempt from overtime?
The Department of Labor's FLSA joint employer regulation at 29 CFR Part 791 is currently marked Reserved on the eCFR, with the last change dated October 5, 2021 when the 2020 joint employer rule was rescinded. There has been no DOL joint employer regulation in force since then.
How is overtime calculated on joint employer liability?
joint employer liability is added to the week's straight-time pay, the total is divided by hours worked to get the regular rate, and the half-time premium is paid on that rate for every hour over 40. On April 23, 2026 the Department of Labor published a proposed rule to restore joint employer regulations to 29 CFR Part 791, with comments due June 22, 2026.
What does an overtime hour cost at franchise wages?
At the BLS May 2025 national median for food service managers, $69,390 a year or about $33 an hour, an overtime hour is $50 before any bonus or differential is added to the rate.
What does managed payroll cost for a franchise?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Joint employer liability, multi-entity payroll and franchisor reporting requirements are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Franchise Operations. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Overtime Pay Under the FLSA
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