José Juarez never expected to be involved in one of the biggest clashes between American labor and business owners in decades. He was just trying to take care of his family.

Mr. Juarez bikes 16 miles a day from Yonkers, N.Y., to his $10.50-an-hour job at a Domino’s Pizza franchise in Manhattan.

He could take the subway, but riding his bike saves him at least $5 in fares each day, he says – which adds up to over $100 a month. After his shift making pizzas and on his days off, he works a second job, delivering food for another uptown restaurant – allowing him to provide for his family and send some money back to parents in Guerrero, Mexico.

“There’s no benefits, no sick days, no medical – it’s sometimes depressing,” Juarez says, through an interpreter. “My son wants to see me, but I need to rest when I’m home since I have to work so much with my two jobs.”

Three years ago, when his son was a baby, Juarez joined the FightFor15 protests. The movement, which has racked up significant wins in Democratic-led states like New York and California, has helped turn the minimum wage fight into one of the most visible fronts in the income inequality battle and reinvigorated elements of the American labor movement.

That momentum has encouraged liberal politicians and policymakers from the White House to city halls to go further, chipping away at labor laws that are nearly a century old and, they say, wildly out of sync with today’s economic realities.

“There is a new effort to take old laws shaped under old economic structures and figure out how they can be used to get at the way the economy and work structures exist today,” says Jennifer Gordon, a professor at Fordham Law School and an expert in labor law and immigration.

The nation’s labor laws, and the basic social contract they established, were mostly formed when the country's corporate behemoths and large-scale employers made American manufacturing a global force. The laws regulated an economy characterized by jobs that provided a steady and sufficient income for middle-class Americans.

Since 1970, however, one-third of those manufacturing jobs have disappeared, signifying a broader shift in the American economy toward jobs that lack benefits, steady hours, or good pay. The trend has in part fueled the most significant populist backlash in a generation, upending American politics. But the laws governing employee rights and corporate practices haven’t changed.

“So US labor law has not kept up with changing times in terms of protecting workers,” says Jonathan Westin, executive director of New York Communities for Change, a grassroots coalition of working class families and one of the founding organizations of the FightFor15 movement, that began in New York City in 2012. “Whether it's the franchise loophole, the independent contractor model, it’s creating a very different workforce in the modern era.”

The liberal labor experiment

With Washington in partisan deadlock, liberal lawmakers have made several efforts to close the loopholes they see in the general American labor contract – some that conservatives and business owners say have overreached what the market can bear.

Liberal cities such as Seattle, San Francisco, and Los Angeles, as well as the blue state bastions California and New York have signed flexible versions of a $15 minimum into law in the past year.

In May, the Obama administration changed administrative rules to raise the overtime ceiling to include an estimated 4.2 million more workers. Before, only salaried workers making less than about $24,000 a year qualified for overtime. As of December, any worker making less than $47,466 a year must be paid time and a half. The Obama administration estimates it will boost wages for workers by $12 billion over the next 10 years.

In August last year, the National Labor Relations Board (NLRB) “refined” its definitions of a joint employer, making it easier to hold corporate parents responsible for the labor violations of their individual franchisees. Previous joint employer standards, the Board said, “failed to keep pace with changes in the workplace and economic circumstances.”

In May, New York’s Attorney General Eric Schneiderman sued Domino’s parent company, using the expanded definition of joint employment to hold it responsible for the franchisees accused of underpaying its workers.

“Lawsuits like Schneiderman’s are likewise arguing, we have to go back to ‘first principles,’ ” says Professor Gordon. “Let’s look at what we meant by an ‘employer,’ and who should be liable for the laws that we passed in the 1930s.

The restaurant industry employs about 14.4 million people – or 10 percent of the overall US workforce – generating nearly $800 billion in sales every year, according to the National Restaurant Association in Washington, D.C.

These are mostly small businesses, with jobs that used to be considered entry-level employment for teens and others. But the average age of workers in the fast-food industry is now 29, and more than a quarter of them, like Juarez, are parents raising children, according to the Center for Economic and Policy Research in Washington.

“Over the last few years … there’s been a definite diminishment of the social contract at work,” says Gary Chaison, professor of industrial relations at Clark University’s Graduate School of Management in Worcester, Mass.

Two views of the changes

Juarez is happy with the results of his first experience with grassroots organizing: New York City will be among the first places in the country to reach the symbolic $15 threshold at the end of 2019, giving workers like Juarez significant raises over the next few years.

But small business owners say that $15 an hour will cause them to have cut back – either on workers or their hours. And the new definition of joint employer, business advocates argue, will damage what they see as the backbone of the American economy.

“Franchisees, these are small business owners,” says Jess Dance, a partner at the Denver office of Gardere Wynne Sewell, and a former assistant attorney general in Colorado now representing franchisor parents in labor litigations.

“For decades, it has always been the franchisee's responsibility to comply with employment laws, wage and hour laws,” says Mr. Dance. “And because of that, it’s been well established, for decades, that franchisors are not joint employers, they are not jointly liable for franchisees violations of wage and hour laws.”

For Catherine Monson, CEO of the franchisor Fastsigns International in Carrollton, Texas, the NLRB’s new definitions imperil a business model that actually helps workers enter the middle class.

“The real answer to income inequality is the franchise model,” says Ms. Monson, “because I know many folks who were either immigrants or minorities and decided that they want to change the circumstances of their lives, and bought a franchise.”

“And through buying that franchise,” she continues, “they not only created jobs and economic output, but pulled themselves up by their bootstraps to get into the middle class.”

The dispute over the definition of employer may ultimately have to be adjudicated by federal courts, experts say.

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But Juarez, for his part, sees the recent victories of FightFor15 as the path to a better life for himself and his family.

“In the future, when we start making $15, hopefully we’ll also have a union and benefits,” he says. “This will be a lot better for me and my family.”