Labor & Employment Law Daily Wrap Up, HOUSE NEWS—Bipartisan ‘American Franchise Act’ seeks to nail down narrower test for franchisor liability, (Sep 12, 2025)

By Brandi O. Brown, J.D.

It is a narrower version of a bill put forward in July.

The “American Franchise Act,” introduced in the U.S. House of Representatives earlier this week by 14 members, including Rep. Don Davis (D-NC) and Rep. Kevin Hern (R-OK), is a bill that seeks to establish that franchisees and franchisors are separate employers unless the franchisor possesses and exercises substantial and immediate control over essential terms and conditions of employment.

Although the text of the bill is not yet available, it is a version of the “Save Local Business Act” put forward in July, narrowed to apply only to the franchisee/franchisor relationship. In that Act, the National Labor Relations Act and the Fair Labor Standards Act of 1938 would be amended to include provisions regarding when an employer could be considered a joint employer. Under the Saving Local Business Act, “An employer may be considered a joint employer of the employees of another employer only if each employer directly, actually, and immediately, exercises significant control over the essential terms and conditions of employment of the employees of the other employer, such as hiring such employees, discharging such employees, determining the rate of pay and benefits of such employees, supervising such employees on a day-to-day basis, assigning such employees a work schedule, position, or task, or disciplining such employees.” That Act has not moved past the House.

“Changes to joint-employer rules have caused costly uncertainty in the industry for too long," said Davis. "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."

“As one of the few franchisees in Congress, I understand how damaging an ever-changing joint-employer rule is to the franchise business model,” said Rep. Hern. “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.”

The American Franchise Bill was introduced by Reps. Mark Alford (R-MO), Ami Bera (D-CA), Jim Costa (D-CAL), Henry Cuellar (D-TX), Don Davis (D-NC), Chuck Edwards (R-NC), Adam Gray (D-CAL), Vicente Gonzalez (D-TX), Kevin Hern (R-OK), Ryan Mackenzie (R-PA), Nathaniel Moran (R-TX), August Pfluger (R-TX), Hillary Scholten (D-MI), and Beth Van Duyne (R-TX).

It is supported by the International Franchise Association and several other industry groups.

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