USA Trends and Developments Contributed by: Carmen D. Caruso, Carmen D. Caruso Law Firm
rule that the NLRB under the Biden administration had imposed, which labour advocates had applauded. The ramifications of joint-employer status run deeper than the potential for collective bargaining, which could disadvantage franchised business outlets that compete with independents. At issue is the degree of control that franchisors may exert over their fran - chisees without becoming a joint employer, and more ominously whether the imposition of joint-employer liability would cause franchisors to exert heightened control (to protect themselves from employment and tort liability) to the point that franchisees would remain independent businesses in name only. Under the reinstated 2020 rule, 29 CFR Section 103.40, a franchisor is a joint employer only if it pos - sesses and exercises substantial, direct and imme - diate control over essential terms and conditions of employment (hiring, firing, discipline, supervision, wages, hours and the like). See Chamber of Com- merce of the United States v NLRB , 723 F Supp 3d 498 (ED Tex 2024). Brand standards, training, quality control and operational guidance generally fall out - side the definition when they do not cross into direct employment decision-making. Evidence of indirect control, contractually reserved but never exercised authority, or control over mandatory subjects of bar - gaining other than essential terms and conditions is probative only to the extent that it supplements and reinforces evidence of direct and immediate control. This current standard reflects decades of judicial devel - opment. Under the common-law framework articu - lated in NLRB v Browning - Ferris Industries , Inc , 691 F2d 1117, 1121 (3d Cir 1982), joint-employer status is a factual question requiring examination of whether an employer “possessed sufficient control over the work of the employees to qualify as a joint employer”. Where two or more employers exert significant control over the same employees and share or co-determine essential terms and conditions of employment, they constitute joint employers. Id. Courts have empha - sised that the putative joint employer must retain for itself sufficient control of the terms and conditions of employment of the employees employed by the other employer. See Clinton ’ s Ditch Cooperative Co v NLRB , 778 F2d 132, 138 (2d Cir 1985); NLRB v Solid
Waste Servs , 38 F3d 93, 94–95 (2d Cir 1994). Limited supervision, indirect involvement or infrequent con - tact does not meet the legal threshold. See Clinton ’ s Ditch , 778 F2d at 138–139; Solid Waste Servs , 38 F3d at 94–95. Meanwhile, proposed federal legislation – the Ameri - can Franchise Act (HR 5267, introduced September 2025 with bipartisan support) – advanced out of the House Education and Workforce Committee in mid- 2026 and awaits full House consideration, with a com - panion measure in the Senate. The legislation would codify a uniform federal definition under the National Labor Relations Act (NLRA) that attempts to insulate franchisors from joint-employer status for activities inherent to protecting the brand while still imposing liability where actual, substantial direct control is exer - cised. Importantly, even if enacted, the Act would not pre-empt state-law joint-employer tests in wage-and- hour, discrimination or personal-injury claims. Whether the American Franchise Act will become law is uncertain. For now, it has provoked widespread debate not merely between labour union advocates and the franchising industry but within franchising, as reasonable franchisors and franchisees differ on whether the law would go too far, or not far enough, in calibrating the optimal degree of control consistent with the franchise business model. Until comprehensive legislation is enacted and sur - vives challenge, efforts by labour unions, employ - ment plaintiffs’ counsel and personal-injury lawyers to impose joint-employer liability will continue. Best practices for franchisors remain crisp contractual lan - guage, operational discipline that keeps franchisees as the sole employers of their workforces, and careful training of field personnel. Independent Franchisee Associations Independent franchisee associations continue to increase in number – a sign of discontent that is likely to grow further as pressure on franchisor management to deliver investor results intensifies. At the major- brand level, associations increasingly co-ordinate their advocacy through the Coalition of Franchisee Associations. Newer or smaller brands show organ - ising activity visible at the American Association of
98 FRANCHISING 2026
C HAMBERS.COM
Powered by FlippingBook