A bipartisan group in the U.S. House of Representatives introduced the American Franchise Act (H.R. 5267), on Sept. 10, 2025, taking direct aim at the standard for determining when franchisors may be considered joint employers of a franchisee’s employees under the National Labor Relations Act (NLRA) and Fair Labor Standards Act (FLSA). If enacted, the Act would bring clarity — and sanity — to what has become a long-volatile area of law.
The past decade has witnessed wild swings in how joint employment is evaluated under the NLRA, the federal law governing collective bargaining and certain labor practices, and the FLSA, the federal wage-and-hour law.
Through agency rulemaking and court challenges, the legal standard has bounced between a focused test — based on whether a putative joint employer actually exercised “direct and immediate control” over essential employment terms and conditions — to an expansive standard that considered indirect control and the right to control, even if never exercised. And with each change in presidential administration, this test has flipped back (and back and back again).
These swings create serious uncertainty for franchise businesses. Broad interpretations of joint employment expose franchisors to potential joint liability, based solely on a franchisor exercising the kind of brand standards and control inherent to franchising. Meanwhile, the constant regulatory flux makes it difficult for franchise businesses to...
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