American Franchise Act Moves Toward Full House Vote
American Franchise Act advances, aiming to protect franchisors from joint-employer liabilities.
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The House Education and Workforce Committee has voted to advance the American Franchise Act, which aims to define the joint-employer standard at the federal level. This legislation seeks to reduce franchisors’ liability for labor infractions committed by their franchisees, thus supporting the franchise business model amidst changing political landscapes. With 140 bipartisan co-sponsors, the bill's future in the Senate remains uncertain.
Why It Matters
If passed, this legislation may significantly alter the operational framework for franchisees, potentially enhancing their unit economics by reducing the franchisee liability landscape.
The House Education and Workforce Committee has advanced the American Franchise Act (H.R. 5267) toward a full House vote, a move seen as essential in stabilizing the joint-employer standard within federal law. This legislation aims to limit franchisors' liability for labor violations committed by franchisees and is backed by approximately 140 bipartisan co-sponsors. Currently, the joint-employer standard is dictated by the National Labor Relations Board (NLRB), which is susceptible to shifts based on political leadership, having changed four times in the last decade.
The proposed act would introduce protective language to the National Labor Relations Act and the Fair Labor Standards Act, making it harder to hold franchisors accountable for their franchisees’ non-compliance on wage and labor laws. Michael Layman, chief advocacy officer of the International Franchise Association, emphasized that this bill is vital for preserving the franchise business model and keeping franchisees' operations viable. “Franchising has been dealing with unnecessary joint-employer confusion for more than a decade,” Layman stated, reflecting on the negative impact previous changes to the standard have had on franchising.
