Congress may vote during this session on the American Franchise Act (AFA), legislation that would undo longstanding “joint-employer” protections that hold accountable corporations that cheat workers out of earned wages, violate child labor laws, or undermine workers’ union rights. Without these protections, a franchisor would be free to structure contracts with small franchisees in ways that provide it the authority to control work conditions at franchise locations but escape liability for labor and employment law violations. Although the bill has not advanced out of committee, a handful of Democratic lawmakers and numerous Republicans are sponsoring H.R. 5267, raising concerns that the bill may pass the House of Representatives and possibly even become law.
If enacted, the AFA would roll back protections for the nearly 9 million Americans working at franchises, thereby leaving the owners of more than 800,000 individual franchise establishments solely accountable for any workplace misdeeds.
Contrary to supporters’ claims, the AFA’s changes go well beyond a company’s need to control brand quality; they also take control away from franchise owners in order to create a legal loophole for large corporations. The legislation would permit a corporation to act like an employer—for example, allowing franchisors to dictate minimum staffing levels, recruiting, and hiring standards; express negative opinions of franchise employees; and even refuse to allow a franchisee’s employee to perform work under a franchise contract—but escape legal consequences when the corporation violates Americans’ basic employment rights.
For more than 90 years, U.S. law has recognized that the company that signs a worker’s paycheck may not be the only company that controls workplace conditions. Federal laws governing minimum wage, collective bargaining rights, workplace safety, antidiscrimination, family and medical leave, and protections for migrant workers all include employment definitions that help ensure that companies that share control over workplace conditions are jointly liable for violations of the law.
Joint-employer responsibility is an infrequently used but powerful tool to protect workers’ rights. Labor outsourcing is common in working-class jobs, particularly for janitorial positions and security officers, hotel and restaurant workers, home care workers, and agricultural laborers, as well as construction and warehouse workers. Most corporations that contract with a labor supplier do not do so with the aim of violating worker protection laws. But in some instances and sectors—such as the heavily franchised fast-food industry—corporations may be relinquishing the official title of employer but not control over the other companies’ basic business decisions or workplace conditions.
For example, some fast-food franchisors control almost every aspect of a franchisee’s business with operations manuals that stretch many hundreds of pages, dictating everything from requirements of workers’ training, dress, and appearance to approved food and merchandise suppliers to participation in advertising, sales promotions, and required computer systems. According to Boston University’s Andrew Elmore, “Since franchisors aggressively police nearly all cost variables, suppressing employee wages is one of the few ways that franchisees can boost store profit by cutting costs.”
Corporations can use franchise contracts and ongoing interactions with franchisees to indirectly control restaurant workers, which can result in outsourced workers being cheated out of wages and deprived of their rights. Indeed, a 2025 report from researchers at Northwestern and Rutgers universities found that incidence of wage theft—employers paying workers less than they are legally owed—tripled among Los Angeles fast-food workers between 2009 and 2024, costing 25 percent of the city’s fast-food workers approximately $44 million each year. Similarly, franchise restaurant owners, facing slim profit margins, may not be able to agree to any collectively bargained wage and benefits increase without first renegotiating the terms of their franchise agreement.
Over the past several years, fast-food workers and pro-worker policymakers have increasingly sought to hold to account corporate franchisors that retain control of franchise workplaces through lawsuits and modernized regulations. During the Biden administration, officials enforcing labor laws strengthened protections to ensure that all companies that control the conditions of employment come to the bargaining table. The Trump administration has already revoked that standard and is moving to weaken joint-employer enforcement under several other employment laws.
Yet, the AFA would go even further to codify weak protections for franchise employees and is one of several measures being debated by Congress to do so. The Save Local Business Act threatened to revoke joint-employer protections for workers at franchises and other sorts of labor subcontractors before it was pulled from a floor vote in January. Similarly, if the AFA were to be enacted, likely only the clumsiest corporate bad actors would be held to account.
Under the legislation, a corporate franchisor could avoid employer status as long as it requested—but did not determine—staffing changes. It could refuse to allow a franchisee’s employee to perform work under contract terms as long as it didn’t fire the worker itself. It could even tell “a franchisee’s employees what work to perform, or where and when to perform the work”—just as long as it did not dictate how to do the work.
Without strong joint-employer protections, workers will be vulnerable to wage theft and violations of their rights, and small business owners will have less control over decisions affecting their businesses. Pro-worker and pro-small business lawmakers should stand up to attempts by the Trump administration and Congress to dismantle these important protections.