HR-5267-119
Placed on the Union Calendar, Calendar No. 702.
Sponsored by Kevin Hern (R-OK)
What it does
This bill would amend the National Labor Relations Act and the Fair Labor Standards Act to define "joint employer" narrowly for franchise relationships. A franchisor would only be considered a joint employer of a franchisee's employees if it exercises "substantial direct and immediate control" over essential terms like wages, benefits, hiring, discharge, or supervision—excluding brand standards, training materials, or minimum staffing guidance. The changes would not apply to labor proceedings already underway before enactment.
Who benefits
Franchisors (such as national restaurant, hotel, and retail chains) who would face reduced legal liability and bargaining obligations toward franchisees' workers; franchisees who retain sole legal responsibility for labor matters and may avoid pressure from franchisors to alter labor practices; business groups representing the franchise industry, which reports roughly 8.4 million U.S. workers.
Who is hurt
Employees of franchised locations, who would lose the ability to hold the larger franchisor company jointly liable for wage violations, unsafe conditions, or unfair labor practices in most cases; labor unions seeking to bargain with the entity that sets brand-wide policies; workers pursuing wage-and-hour or unfair labor practice claims who may find only the often smaller, less-resourced franchisee as a defendant.
Supporters argue
Supporters argue that expansive joint-employer standards adopted by the NLRB in recent years created legal uncertainty that discouraged franchisors from providing quality and brand guidance essential to the franchise model, threatening an industry that generates $825 billion in economic output and employs 8.4 million workers. They contend this bill restores the traditional franchisor-franchisee relationship by clarifying that routine brand oversight—setting quality standards, offering training materials, or requiring minimum staffing—does not create employer liability, preserving franchisees' independence as small business owners.
Opponents argue
Opponents argue that franchisors often exercise significant real-world control over wages, scheduling software, and operational policies across thousands of locations, and that narrowing joint-employer liability lets them evade responsibility for labor violations while still profiting from centralized control. They contend workers at franchised locations would face a harder path to recourse for wage theft or unfair labor practices, since franchisees are frequently smaller businesses with fewer resources to pay judgments or engage in collective bargaining, effectively insulating the more powerful corporate parent.
Constitutional context
Congress has broad authority under the Commerce Clause (Art. I, §8, cl. 3) to define employment relationships and labor standards affecting interstate commerce, as recognized in cases like NLRB v. Jones & Laughlin Steel Corp. (1937), which upheld federal labor regulation of businesses engaged in interstate commerce.
Checks and balances
Congress would legislate a statutory definition that binds the NLRB and courts, reducing agency and judicial discretion to interpret "joint employer" status case-by-case, with courts retaining review authority over specific factual disputes.
Historical precedent
The NLRB and Department of Labor have repeatedly revised the joint-employer standard through rulemaking and adjudication since 2015 (including the 2015 Browning-Ferris decision and subsequent 2020 and 2023 rules), and this bill follows past congressional attempts, such as the Save Local Business Act passed by the House in 2017, to codify a narrower standard by statute.