By Andrew Miller
If you own a franchise, or you’re weighing whether to buy into one, a bill moving through Congress right now could soon change how much legal exposure you have.
The question at the center of it: is it the responsibility of the franchisor or the franchisee when an employee sues over something like unpaid overtime or a wage violation?
Right now, both parties could legally be on the hook.
For example, an employee’s attorney could argue that if the company exercises enough influence over how an individual location runs, it counts as a “joint employer.”
This could be anything from the required software to operate, standardized training, and even the set procedures. That’s part of why some franchisors have pulled back on the support they offer.
Help now, in the form of training or oversight, can be used against them in future cases. So franchise owners often get less guidance on the front end, specifically to avoid more liability if something goes wrong.
A bill called the American Franchise Act would narrow that standard.
Under it, a franchisor is only a joint employer if it exercises substantial, direct, and immediate control over specific things like wages, hours, hiring, or firing at that location. Brand standards, like a shared handbook or required uniforms, wouldn’t be enough on their own.
Representative Kevin Hern (R-OK) and Representative Don Davis (D-NC) introduced the bill in September 2025. Last week, it passed out of committee, a required early step before it can get a vote from the full House before moving on to the Senate.
This bill doesn’t decide how involved a brand is in a location’s day-to-day operations, that’s unchanged. It decides who’s legally on the hook when an employment dispute, like a wage or overtime claim, goes wrong.
P.S. Legal risk aside, growing a franchise location still comes down to having the capital to do it.
If you’re weighing an expansion or a new location, Signet can help you find the right funding.