A strong coalition of taxpayer, free-market, and small business advocates on Thursday applauded the introduction of the bipartisan American Franchise Act, legislation that protects the franchise business model and the millions of workers it employs.
The bill, introduced by Rep. Kevin Hern, a Republican from Oklahoma, clarifies the “joint employer” standard to provide long-overdue certainty for local franchise owners and their employees. In recent years, the National Labor Relations Board (NLRB) has attempted to expand the “joint employer” standard, aiming to make both franchisors and franchisees liable for the same workers.
“Franchises are one of the most reliable ways for everyday entrepreneurs to start and grow a business,” said Pete Sepp, President of National Taxpayers Union, which led the coalition letter supporting the introduction of the bill. “This legislation ensures they can continue to thrive without fear of senseless rules laid down by Washington undermining their success.”
According to the U.S. Census Bureau, more than 498,000 franchise businesses employ 9.6 million workers and generate over $1.7 trillion in annual sales.
However, recent attempts to expand the joint employer standard by the NLRB have created costly legal uncertainty. The 2015 version of the rule cost franchise businesses over $33 billion annually, eliminated 376,000 job opportunities, and triggered a 93% spike in lawsuits. From NTU’s standpoint, this diminished economic activity also hurts taxpayers through lower revenues, and, in turn, higher government deficits.
To address this, the American Franchise Act provides clarity by codifying a straightforward joint employer standard: a franchisor may only be considered a joint employer if it possesses and exercises substantial direct and immediate control over essential terms of employment.
This mirrors historical precedent and ensures that small business owners can make independent decisions about hiring, training, and daily operations.
The bill is currently awaiting action in the House Committee on Education and Workforce.
The letter endorsing the bill was signed by representatives of 16 organizations:
Pete Sepp, President, National Taxpayers Union
Casey Given, Executive Director, Young Voices
James L. Martin, Founder and Chairman, 60 Plus Association
Saulius “Saul” Anuzis, President, American Association of Senior Citizens
Will Swaim, Vice President, California Policy Center
Ryan Ellis, President, Center for a Free Economy
Jeff Mazella, President, Center for Individual Freedom
Grant Callen, Founder & CEO, Empower Mississippi
Patrice Onwuka, Director, Center for Economic Opportunity, Independent Women’s Voice
Alfredo Ortiz, CEO, Job Creators Network
Geoffery Lawrence, Director of Research, Nevada Policy
Paul Gessing, President, Rio Grande Foundation
Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council
Brent Gardner, Chief Government Affairs Officer, Americans for Prosperity
Patrick Brenner, President & CEO, Southwest Public Policy Institute
Dan Garza, President, The LIBRE Initiative
Read the full text of the letter.