A bipartisan group of lawmakers has introduced the American Franchise Act, legislation aimed at ending years of uncertainty surrounding how federal labor law treats franchisors and franchisees.
“Changes to joint-employer rules have caused costly uncertainty in the industry for too long,” Representative Don Davis (D-NC), one of the bill’s sponsors, said in a press release. “The American Franchise Act aims to restore stability by clarifying that franchisors and franchisees operate as independent employers while safeguarding workers through established labor standards.”
The bill, introduced by 14 House members, including Davis and Representative Kevin Hern (R-OK), seeks to formally establish in federal law that franchisees are independent business owners rather than employees of their parent brand. The International Franchise Association (IFA), which represents more than 830,000 franchise businesses nationwide, praised the measure as a landmark step.
“This legislation recognizes that franchisees are small businesses and their independence must be protected by federal law,” Matt Haller, IFA president and CEO, said. “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 the franchise relationship.”
Policy whiplash
At the center of the fight is the joint employer standard, the legal test that determines when two entities share responsibility for compliance with the National Labor Relations Act and the Fair Labor Standards Act. For franchises, it decides if a brand can be held liable for workplace violations at independently owned locations.
That standard has shifted multiple times over the past decade. In 2015, the Obama-era National Labor Relations Board (NLRB) expanded the definition in its Browning-Ferris Industries decision, determining that companies could be considered joint employers even if they had only indirect control over working conditions. Franchise advocates argued the move threatened the foundation of the franchise model.
The Trump administration narrowed the definition in 2020, requiring “substantial direct and immediate control” over workers to establish joint employer status. In 2023, the Biden administration broadened the standard, but the “Biden Rule” was later struck down by a federal judge, reverting the industry to the 2020 standard.
In July, lawmakers also advanced the Save Local Business Act, which sought to roll back the NLRB’s broadened joint employer rule across all industries. That measure passed the House with bipartisan support but has not advanced in the Senate. By contrast, the American Franchise Act is narrower in scope, applying only to the franchisor–franchisee relationship. Supporters say this more tailored approach gives the bill a better chance of becoming law, while still providing the certainty franchise owners have long sought.
These frequent policy swings have left franchisors and franchisees alike uncertain about their legal responsibilities — and the future.
Related: Thinking About Franchising Your Business? Read This First.
What the bill does
The American Franchise Act would codify a narrower joint employer standard specific to franchising. It states that franchisors and franchisees are separate employers unless one directly controls the other’s employees. The measure applies only to the franchise relationship and does not affect joint employer determinations in other industries.
“As one of the few franchisees in Congress, I understand how damaging an ever-changing joint-employer rule is to the franchise business model,” Hern said. “I’m pleased that we were able to come together in a bipartisan effort to create legislation that safeguards small businesses.”
Whether the bill advances this session remains to be seen, but the proposal marks the most significant effort yet to settle a fight that has defined the franchise industry for the past decade.
Related: She Moved to the U.S. at 17 and Worked at a Gas Station — Then Became CEO of a $1 Billion Brand
A bipartisan group of lawmakers has introduced the American Franchise Act, legislation aimed at ending years of uncertainty surrounding how federal labor law treats franchisors and franchisees.
“Changes to joint-employer rules have caused costly uncertainty in the industry for too long,” Representative Don Davis (D-NC), one of the bill’s sponsors, said in a press release. “The American Franchise Act aims to restore stability by clarifying that franchisors and franchisees operate as independent employers while safeguarding workers through established labor standards.”
The bill, introduced by 14 House members, including Davis and Representative Kevin Hern (R-OK), seeks to formally establish in federal law that franchisees are independent business owners rather than employees of their parent brand. The International Franchise Association (IFA), which represents more than 830,000 franchise businesses nationwide, praised the measure as a landmark step.
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