The back-and-forth on whether a franchisor is considered a joint employer may be coming to an end.
On Wednesday, the House of Representatives introduced the American Franchise Act, a bill that would codify a “direct and immediate” joint employer standard for franchise restaurants. Under this stricter definition and higher bar, franchisors would be less likely to share responsibilities with franchisees for violations of the National Labor Relations Act and Fair Labor Standards Act. This aligns with the rule currently in effect.
Restaurant industry organizations argue that a wider definition of joint employer would erode the independence between franchisors and franchisees. If franchisors believe they could be held liable for violations at the franchise level, they may exert more control over hiring, operations, and other business decisions.
The debate over the joint-employer rule has seesawed sharply since 2015, when the National Labor Relations Board’s Browning-Ferris decision expanded liability to companies that exerted even indirect or potential control over workers. Business groups and franchisors pushed back, and in 2020 the Trump-era board reinstated a narrower standard requiring direct and immediate control over employment terms. The Biden administration sought to broaden the rule again in 2023, but in March 2024 a federal judge struck down the expansion, leaving the tighter 2020 standard in place.
“Restaurants are the cornerstone of the American economy and a vital source of employment. In the last decade, the ‘joint employer’ standard has changed four times—the constant regulatory whiplash leaving restaurant owners confused and apprehensive,” Sean Kennedy, the National Restaurant Association’s executive vice president for public affairs, said in a statement. “American Franchise Act creates a clear ‘joint employer’ standard based on direct and immediate control of the conditions of their workforce’s employment. This permanent definition would encourage entrepreneurship and stimulate economic growth in communities across the country.”
The International Franchise Association praised the bill, calling it a “landmark moment for America’s more than 831,000 franchise small businesses.” The group will lead a full-scale national and regional advocacy push for the legislation through its membership and as a founding member of the Coalition to Save Local Businesses.
“This legislation recognizes that franchisees are small businesses, and their independence must be protected by federal law,” Matt Haller, IFA President and CEO, said in a statement. “The American Franchise Act allows franchisors to properly support their franchisees—who are often first-time business owners from all walks of life—without the fear of an overly broad joint employer standard undermining the unique benefits of franchise relationship.”
The bill was introduced by a bipartisan group of 14 representatives.
