A House Bill Would Freeze the Joint Employer Standard. The Reason Is That It Has Moved Six Times in Ten Years.
The short answer
The American Franchise Act, H.R. 5267, was reported to the House on September 8, 2026. It would write the narrow joint employer standard into the National Labor Relations Act and the Fair Labor Standards Act, so that a franchisor is a joint employer of its franchisee's employees only where it possesses and exercises substantial direct and immediate control over specified terms of employment. The case for it is not really about the standard. It is about the fact that the standard keeps changing while franchise agreements run ten to twenty years.
Why joint employer status matters in a franchise system
Two consequences, and they are large.
Wage and hour exposure. Joint employers are jointly and severally liable for unpaid minimum wages and overtime under the FLSA, plus liquidated damages and attorney's fees. For a franchisor, a joint employer finding turns one franchisee's payroll practices into system-wide exposure and makes the franchisor the deep-pocket defendant in a collective action spanning hundreds of locations.
Labor relations. A joint employer must bargain over the terms it controls, can be named in unfair labor practice charges, and loses neutral-employer protection against secondary activity. Under a broad standard, a union can seek a bargaining unit spanning multiple franchisees with the franchisor at the table.
The history, which is the actual argument for the bill
2015. In Browning-Ferris Industries, 362 NLRB No. 186, the Board held that indirect control and reserved but unexercised authority count toward joint employer status.
2017 and 2018. The Board overruled Browning-Ferris in Hy-Brand, then vacated that decision months later over a member's conflict, reviving Browning-Ferris.
December 2018. In Browning-Ferris Industries v. NLRB, 911 F.3d 1195, the D.C. Circuit upheld the Board's authority to consider indirect and reserved control as consistent with common law agency, but vacated in part and remanded.
February 2020. The Board issued a final rule at 85 Fed. Reg. 11184, codified at 29 C.F.R. 103.40, requiring possession and exercise of substantial direct and immediate control over one or more of eight essential terms.
October 2023. The Board issued a new final rule at 88 Fed. Reg. 73946 returning to a common law approach in which authority to control counts whether or not exercised and whether exercised directly or indirectly.
March 2024. In Chamber of Commerce v. NLRB, No. 6:23-cv-00553 (E.D. Tex.), the court vacated the 2023 rule in its entirety, including its rescission of the 2020 rule.
February 2026. The Board published a withdrawal at 91 Fed. Reg. 9707 conforming the regulatory text to the vacatur and restoring the 2020 rule language, describing the action as ministerial.
So the 2020 rule governs today. It never actually lapsed, because the court vacated the rescission along with the replacement.
What the bill would do
H.R. 5267 was introduced September 10, 2025 by Representative Kevin Hern, with Representative Don Davis as lead Democratic cosponsor and thirteen original cosponsors. It was referred to the Committee on Education and Workforce and reported to the House on September 8, 2026 as House Report 119-802. A Senate companion, S. 3525, was introduced December 17, 2025 by Senator Roger Marshall.
The bill adds a new section to the NLRA, with a parallel FLSA provision. A franchisor is a joint employer only if it possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment. Those terms are an exhaustive list of eight: wages, benefits, hours of work, hiring, discharge, discipline, supervision and direction. Control must have a regular or continuous consequential effect; sporadic, isolated or de minimis involvement does not count. Franchise terms are defined by cross-reference to 16 C.F.R. 436.1, the FTC Franchise Rule. It applies prospectively only.
It also lists conduct that does not constitute direct and immediate control, including establishing operating hours, setting minimum staffing levels to meet service standards, bringing employee misconduct to the franchisee's attention while leaving the decision to the franchisee, setting brand standards, offering training materials, and offering optional scheduling and task-assignment tools.
The language is lifted nearly verbatim from the 2020 Board rule. The bill's contribution is not a new standard. It is putting the existing one in statute, beyond the reach of Board rulemaking and, because it also amends the FLSA, beyond Department of Labor rulemaking.
Our take: the volatility is the injury, and the FLSA side is worse
The strongest argument for codification has nothing to do with whether the narrow standard is correct. It is that a franchisor calibrating its system to the 2020 rule was exposed under the 2023 rule, and a franchisor calibrated to the 2023 rule is now back under the 2020 rule. Franchise agreements run ten to twenty years. Regulatory standards have changed or attempted to change roughly six times since 2015.
The FLSA side is the underappreciated half. The Department of Labor's 2020 joint employer rule had its vertical joint employment provisions vacated in New York v. Scalia in September 2020, and the Department rescinded the rule entirely effective September 28, 2021, removing and reserving 29 C.F.R. part 791. There has been no operative FLSA joint employer regulation for about five years. FLSA joint employment is governed by case law, which means the economic reality test as each circuit applies it. In the Eleventh Circuit that is the Aimable, Antenor, Layton line. A Department NPRM published April 23, 2026 at 91 Fed. Reg. 21878 proposes to restore part 791, and comments closed June 22, 2026, but no final rule has issued.
So a multi-state franchisor today faces one standard under the NLRA, set by a rule a future Board can rescind, and a different and circuit-dependent standard under the FLSA, set by nothing at all.
The honest limits of the bill. It has been reported out of committee, not passed. No floor vote has occurred, and the Senate companion has had no action. Bills reported to the House frequently go no further. And the narrow standard it would codify has never been tested on the merits in a court of appeals; the D.C. Circuit's 2018 reasoning that the common law requires consideration of indirect and reserved control sits in real tension with it.
What does not change either way. The practical guidance for a franchisor is the same under every version of the standard, because every version looks at what you actually do. Control the brand and the product, not the people. Do not set wages or benefits, participate in hiring or firing decisions, discipline employees, schedule individuals, or supervise directly. Keep handbooks, compliance materials and scheduling software optional rather than mandated. Route personnel communications through the franchisee and never to the franchisee's employees. Shared HR and payroll services are the single most common fact pattern that converts advisory support into control.
What it means practically
Franchisors should not restructure a system around a bill that has not passed.
Franchisees should understand that the bill is franchisor-protective. It reduces the likelihood that a franchisor is on the hook for a franchisee's wage and hour violations, which means the franchisee's own exposure is undiluted.
Both sides should note that the bill would make franchisor-imposed compliance and safety standards affirmatively non-probative of control, which addresses a genuine problem: under a broad standard, a franchisor that polices legal compliance across its system generates evidence against itself.
When to call a lawyer
Before a franchisor rolls out any program touching franchisee employees, including shared HR services, mandated scheduling software, or system-wide employment policies. That is where joint employer facts are created.
Why this is not a do-it-yourself problem
Joint employer status is not decided by what the franchise agreement says. Every version of the standard, narrow and broad, looks at conduct, and under the broader versions even unexercised contractual authority counts. That means the exposure is built by operational decisions made by people who are not lawyers: the field consultant who tells a franchisee to fire someone, the corporate program that puts franchisee employees on the franchisor's scheduling system, the compliance initiative that looks like supervision. A disclaimer in the agreement does not fix any of it, and the standard governing it may be different by the time anyone sues.
Talk to us
HDD Law Firm represents franchisees and franchisors in franchise and employment disputes in the Florida state courts, the Southern, Middle and Northern Districts of Florida, and the Eleventh Circuit. If you are evaluating a program that touches franchisee employees, contact us to discuss your matter.
Sources
● House bill seeks to lock in narrow joint employer standard for franchises, QSR Magazine
● H.R. 5267, American Franchise Act, 119th Congress (congress.gov)
● H.R. 5267, reported version, full text (GovInfo)
● S. 3525, American Franchise Act (congress.gov)
● Joint Employer Status Under the National Labor Relations Act, 85 Fed. Reg. 11184 (February 26, 2020)
● Standard for Determining Joint Employer Status, 88 Fed. Reg. 73946 (October 27, 2023)
● Browning-Ferris Industries v. NLRB, 911 F.3d 1195 (D.C. Cir. 2018) (CourtListener)
● Chamber of Commerce v. NLRB, No. 6:23-cv-00553 (E.D. Tex.), docket (CourtListener)
● Rescission of Joint Employer Status Under the FLSA Rule, 86 Fed. Reg. 40939 (July 30, 2021)
● Joint Employer Status Under the FLSA, FMLA and MSPA, NPRM, 91 Fed. Reg. 21878 (April 23, 2026)
● Antenor v. D & S Farms, 88 F.3d 925 (11th Cir. 1996) (CourtListener)
● Layton v. DHL Express (USA), Inc., 686 F.3d 1172 (11th Cir. 2012) (CourtListener)
● Arrington v. Burger King Worldwide, Inc., 47 F.4th 1247 (11th Cir. 2022)
● CRS Report R47943, Joint Employment and the National Labor Relations Act
Disclaimer
This post discusses publicly reported legal developments for general informational purposes. It is not legal advice, it does not create an attorney client relationship, and it does not reflect the firm’s position in any pending matter. Outcomes depend on the specific facts and the governing law of the relevant jurisdiction.