Bipartisan House Bill Seeks to Shield Franchisors Unless They Have 'Direct and Immediate' Control

Overview

After years of regulatory pressure on fast-food chains—from changes to labor rules to local efforts to restrict drive-thrus—Congress is considering a bipartisan measure that would limit franchisors' liability for franchisees' violations. Introduced in September, the American Franchise Act clarifies when a franchisor can be treated as a joint employer of franchise workers.

Background

The National Labor Relations Board (NLRB) has swung between different joint-employer standards over recent administrations. Under Presidents Barack Obama and Joe Biden, the NLRB adopted a broader test that considered two entities joint employers when they shared or codeliberated terms and conditions of employment. That standard could be triggered even by indirect influence over workplace policies.

During President Donald Trump's first term, the NLRB narrowed the standard. The agency then moved back toward the broader approach under Biden. In 2023 the rule was challenged in federal court; the Biden administration subsequently withdrew its appeal and stepped back from trying to reinstate the stricter standard. Observers expect a future Democratic administration might again pursue the broader test.

What the American Franchise Act Would Do

The American Franchise Act would clarify that franchisors and franchisees are distinct legal entities for purposes of joint-employer determinations unless the franchisor exercises "direct and immediate" control over core employment issues such as wages, hiring, work rules, safety protocols, or benefits. The legislation also aims to prevent reinterpretations that would convert the "direct and immediate" standard into an indirect-control test.

Support, Opposition, and Political Context

The bill has drawn 39 cosponsors in the House, including 13 Democrats—some from reliably blue districts, such as Rep. Ami Bera (D–Calif.), Rep. Troy Carter (D–La.) and Rep. Hillary J. Scholten (D–Mich.). That bipartisan backing stands out compared with earlier congressional votes and state-level pushes, which often divided along party lines. In recent years, states such as California and New York have considered their own franchise liability rules.

Supporters argue the bill protects a diverse set of small business owners: roughly 30% of franchise outlets are minority-owned, compared with about 18% of businesses overall. Franchisees are often multiethnic, neighborhood entrepreneurs who operate community hubs where local groups meet and organize.

Critics counter that narrowing the joint-employer standard could make it harder to hold parent companies accountable for labor-law violations that occur at franchise locations. Labor advocates warn such a change might limit remedies for workers harmed by illegal practices.

Why It Matters

The proposal represents an uncommon bipartisan alignment on a contentious labor-policy issue. At stake is the balance between protecting small, often minority-owned franchise businesses and ensuring accountability for labor standards across complex franchising arrangements. How lawmakers resolve that tension will shape franchise governance, employer liability, and workers' rights at scale.

Note: The bill's ultimate impact will depend on legislative negotiations, judicial rulings, and potential future administrative rulemaking.