Bipartisan House Bill Would Limit Fast-Food Companies' Liability for Franchisees' Violations

After years of fast-food restaurants being in progressive crosshairs—facing everything from new labor laws to attempts to ban drive-thrus—there may be a beacon of hope on the horizon in the form of an unexpectedly bipartisan bill in Congress. 

One of the most dire threats fast-food joints face is the push to revise joint employer standards for the industry. This change would make parent franchisors liable for the legal violations of individual franchisee outlets, threatening the entire franchise business model. The National Labor Relations Board (NLRB) under Presidents Barack Obama and Joe Biden issued rules specifying that a joint employer relationship was created whenever two business entities shared or codetermined the terms and conditions of employment for workers.

Even indirect control over health or workplace standards could trigger a joint employer designation. Democrats argued that the new rules were necessary to ensure that parent companies were not unfairly ducking liability for labor law violations of their franchisees. 

During President Donald Trump’s first administration, the NLRB overturned the Obama-era rules, but that decision was reversed again during Biden’s term. In 2023, the rules were challenged in federal court, resulting in the Biden administration withdrawing its appeal of the joint employer rule decision and abandoning the effort to change the rules. It’s expected that a future Democratic administration would seek to return the joint employer rules to the Obama/Biden standards.

However, a recent bill introduced in the House of Representatives in September—the American Franchise Act—has attracted unprecedented bipartisan support to clarify that franchisors and franchisees are legally distinct businesses.

The bill would clarify that franchisors are only joint employers if they exercise “direct and immediate” control over issues such as wages, hiring, safety rules, or benefits. Critically, the bill safeguards against efforts to dilute “direct and immediate” control in ways that effectively convert it to indirect control.

The legislation has attracted 39 cosponsors in the House, including 13 Democrats. And the Democratic cosponsors are not merely swing-district moderates, but even some from congressional districts that lean heavily blue, such as Rep. Ami Bera (D–Calif.), Rep. Troy Carter (D–La.), and Rep. Hillary J. Scholten (D–Mich.).

This bipartisan support stands in marked contrast to previous congressional votes involving joint employer standards. A 2023 Congressional Review Act resolution to repeal the Biden-era rules broke almost exactly along partisan lines, excluding some usual crossover senators, such as then-Sen. Joe Manchin (D–W.Va.) and Sen. Josh Hawley (R–Mo.). At the state level, the issue has also been largely partisan, with blue states like California and New York considering their own versions of joint liability laws for franchises.

The potential sea change in Democratic support is long overdue, given that franchise owners are among the most diverse business owners of any sector. Nearly 30 percent of franchise outlets are minority-owned, compared to just 18 percent of businesses overall. These owners embody a meritocratic and multiethnic slice of urban and suburban America, united by a shared pursuit of the American dream. 

Notably, franchise outlets have also become increasingly crucial hubs of civil society across America, serving as venues for local residents to host a range of activities, from study groups to book clubs to gaming groups. Such cornerstones of American life deserve bipartisan support.

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