The American Franchise Act was introduced in the U.S. House of Representatives, aiming to define the standard for “joint employer” status for franchised restaurants. The National Restaurant Association has expressed its support for this legislative effort, which seeks to establish a “direct and immediate” joint employer definition.
According to the National Restaurant Association, nearly 250,000 franchised restaurants operate nationwide, employing more than four million people. The franchise model is described as an accessible way for individuals to start restaurant businesses and contribute to their local economies.
Under current arrangements, local owners handle staff hiring, scheduling, payroll, and daily operations. The joint employer standard clarifies the division of responsibility between franchisors and franchisees regarding business operations.
The proposed American Franchise Act would amend both the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). It specifies that a franchisor can be considered a joint employer only if they have “substantial direct and immediate control over one or more essential terms or conditions of the employees of the franchisee.”
The act also recognizes that while franchisors may set standards to maintain brand consistency, both parties are still independent businesses.
Sean Kennedy, executive vice president for Public Affairs at the National Restaurant Association, stated: “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. 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.”
For over ten years, both the Association and its legal affiliate, the Restaurant Law Center (RLC), have worked to maintain a consistent joint employer standard. Changes made by bodies like the National Labor Relations Board (NLRB) have sometimes broadened what counts as essential employment terms, increasing liability risks for all parties involved in franchise relationships. This could result in operators being held liable for labor violations by other entities with which they do business.
More information about these legal efforts can be found through resources provided by the Association and RLC.
