Bipartisan Bill Seeks Stability to NLRB’s Joint Employer Rule
The International Franchise Association’s 2025 Advocacy Summit started just five days after the bipartisan American Franchise Act was introduced in Congress. The timing allowed more than 400 IFA summit attendees to encourage Washington, D.C., lawmakers and regulators to get behind the bill. If passed, the legislation would clarify and codify the joint employer standard as it applies in franchising. The standard tends to change whenever the political party in control of the White House and National Labor Relations Board (NLRB) changes; it has been altered four times during the past 10 with shifts in presidential administrations.
In an IFA news release, the organization’s President and CEO Matthew Haller pronounced the summit “the most powerful ever with the introduction of the American Franchise Act and an incredible lineup of speakers reinforcing the broad coalition of support for franchising.” (Speakers included Secretary of Labor Lori Chavez-DeRemer; Small Business Administration Administrator Kelly Loeffler; Sen. Roger Marshall of Kansas, a Republican; and Reps. Hillary Scholten, a Michigan Democrat; Don Davis, a North Carolina Democrat; and Kevin Hern, an Oklahoma Republican. Davis and Hern are lead sponsors of the American Franchise Act.)
Haller added that the summit presented a “unified message for strong bipartisan support for the franchise business model … and we are one step closer to the American Franchise Act becoming law.” The legislation is currently under consideration in the House of Representatives. If passed there, it would move to the Senate.
What the American Franchise Act Would Change
Here’s an overview of the American Franchise Act and how it would affect the joint employer standard, as reported on Franchising.com and by the Fox Rothschild law firm:
- The act codifies conditions under federal law when both franchisors and franchisees will be held responsible for violations of the National Labor Relations Act and Fair Labor Standards Act.
- Those conditions are that “a franchisor may be considered a joint employer of the employees of a franchisee only if the franchisor possesses and exercises substantial direct and immediate control over one or more essential terms or conditions of the employees of the franchisee.” This would maintain the 2020 NLRB joint employer standard that is currently in effect. Examples of control include hiring, firing, setting wages and taking disciplinary actions.
- Workers maintain their right to unionize.
The IFA strenuously lobbied in opposition to a 2023 modification to the joint employer standard that would have broadened franchisors’ responsibilities when franchisees violate federal labor laws. A federal court overturned that rule change in March 2024, and in July 2024, the NLRB abandoned its effort to revive it.
Background on the American Franchise Act
Seven Republican and seven Democratic members of Congress introduced the bill, House Resolution 5267 (HR 5267), on Sept. 10. Sponsors besides Hern and Davis were Reps. Scholten; Mark Alford, R-Mo.; Ami Bera, D-Calif.; Jim Costa, D-Calif.; Henry Cuellar, D-Texas; Chuck Edwards, R-N.C.; Vicente Gonzalez, D-Texas; Adam Gray, D-Calif.; Ryan Mackenzie, R-Pa.; Nathaniel Moran, R-Texas; August Pfluger, R-Texas; and Beth Van Duyne, R-Texas.
In explaining his support for the bill, Davis called for Congress to “provide stability for the franchise model of small business by aligning federal statute and long-standing precedent. HR 5267 ends the uncertainty, ensuring owners have the clarity they need to keep hiring and investing in communities across our country,” Franchising.com reported. “It’s about fairness, opportunity and ensuring entrepreneurs from every walk of life have a real shot at living the American dream. … Changes to joint-employer rules have caused costly uncertainty in the industry for too long. 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.”
Hern told fellow lawmakers that “as one of the few franchisees in Congress, I understand how damaging an ever-changing joint-employer rule is to the franchise business model. I’m pleased that we were able to come together in a bipartisan effort to create legislation that safeguards small businesses and individuals working to achieve the American dream across the country.”
Franchising.com quoted Scholten as calling franchising “an economic powerhouse.” That assessment is backed up by the IFA’s 2025 Economic Outlook report, which tallies more than 830,000 U.S. franchise establishments and predicts they will enjoy a year-over-year 4.4% increase in output (value of products and services sold) to $936 billion in 2025. By contrast, the nonpartisan Congressional Budget Office on Sept. 2, 2025, predicted growth of the nation’s gross domestic product would be only 1.4%.
In addition, Scholten told colleagues that the franchise business model is unique and therefore “requires a tailored approach that properly recognizes the relationship between franchisors and franchisees. This bill will do just that. The uncertainty created by shifting regulations is costly to our entrepreneurs. The American Franchise Act provides a clear path forward so they can focus on running their businesses and creating opportunity in communities across the country.”
The full text of the American Franchise Act is available on Congress’s website.
