The joint employer standard determines when two separate businesses, such as a franchisor and a franchisee, may both be treated as employers of the same workers. In franchising, it determines when a franchisor may be treated as an employer of a franchisee’s employees and therefore share an employer’s legal obligation to them.

The standard is significant because an overly broad joint employer rule can place franchisors and franchisees in a joint employer relationship even though franchise businesses are independently operated, and franchisees hire and manage their own employees.

• Under the National Labor Relations Act (NRLA) and Fair Labor Standards Act (FSLA): The joint employer standard affects whether a franchisor and franchisee may be treated as joint employers under the NLRA and FLSA. The American Franchise Act would clarify the standard for franchisor and franchisee relationships under those laws.

• Franchisees operate independently: Franchisees independently hire their teams and run their businesses day to day, while franchisors provide brand consistency, training tools, and support. Actions such as setting minimum standards for brand protection, including protection of trademarks and intellectual property, and offering training materials or other operational resources do not amount to direct and immediate control.

The American Franchise Act (AFA) applies only to franchisors and franchisees under the FLSA and NLRA. It does not cover nonfranchise independent contractor relationships or other tests of multiparty liability, including misclassification, single employer, and agency tests.

• Source: https://www.franchise.org/wp-content/uploads/2026/05/AFA-Backgrounder-2026.pdf
• Source: https://www.franchise.org/advocacy/american-franchise-act/