Brand Standards Are Not Employment Decisions

The law is unsettled in important ways; the bill gives franchising a usable rule

A trademark manual is not a payroll department. Training a system is not the same thing as supervising another company’s employees.”

By Michael Seid, Managing Director, MSA Worldwide

The American Franchise Act is often discussed as though there were one settled national “joint-employer test” and Congress were simply choosing whether to preserve it. This is not accurate.

The National Labor Relations Act and the Fair Labor Standards Act have different texts, different histories, and different lines of judicial and administrative authority. One of the weaknesses in advocacy on both sides is the temptation to compress all of that into a single slogan. It makes for an easier press release — and a worse legal analysis.

Under the NLRA, the National Labor Relations Board’s 2023 joint-employer rule was vacated by a federal district court before it took effect. In February 2026, the Board removed the vacated language from its regulations and returned the text of Section 103.40 to its pre-2023 form.[1] Under the FLSA, the Department of Labor has not maintained generally applicable joint-employer regulations since 2021, and the Department itself has acknowledged that the governing judicial approaches vary among the federal circuits. In April 2026, DOL proposed a new four-factor framework for vertical joint employment.[2]

That history does not mean that “anything goes.” It means Congress has a legitimate reason to provide a franchise-specific rule rather than leave owners, workers, courts, and regulators to chase a standard that changes with the agency, the statute, the circuit, or the election cycle.

Read the verbs

The committee substitute is detailed, which is useful. It does not merely say “direct control” and leave everyone to argue about what that means. It identifies the conduct that counts and the conduct that ordinarily does not.[3]

• Wages: the franchisor actually determines wage rates, salaries, or rates of pay — not merely prices products, recommends labor targets, or discusses industry conditions.
• Hours: the franchisor actually determines employee work schedules or hours — not simply the hours when the franchised business must be open or minimum staffing needed to meet a service standard.
• Hiring: the franchisor decides which particular people will or will not be hired — not merely lawful, safety-related, or brand-protection standards for recruiting and hiring.
• Discharge and discipline: the franchisor makes the actual employment decision — not merely reports misconduct, expresses a concern, or establishes minimum conduct standards.
• Supervision and direction: the franchisor consistently and directly instructs employees how to perform their work or assigns particular employees to schedules, positions, and tasks — not merely offers training materials, demonstrations, brand standards, or optional tools.

The bill also requires the control to have a regular or continuous consequential effect. Sporadic, isolated, or de minimis involvement is not enough. Those distinctions are practical. They tell a court to look at the employment decision, not the logo over the door.

Brand consistency is not optional

Consumers do not experience a franchise agreement — they experience the brand. They expect the same food safety practices, hotel cleanliness, instructional method, customer service, or repair protocol from one franchised location to the next. A franchisor that cannot establish and enforce meaningful standards does not have much of a franchise system. This is why the distinction between what result the brand requires and who controls the employee matters.

A requirement that a restaurant open at 6:00 a.m. does not, by itself, schedule Maria from 5:30 a.m. to 1:30 p.m. A requirement that a hotel room meet a cleanliness standard does not, by itself, hire or discipline the housekeeper. A requirement that technicians complete safety training does not, by itself, set their wages. The local employer still makes those decisions, unless the franchisor actually takes them over.

The same is true of training. A franchisor may teach the franchisee’s managers how the system works, and provide materials the franchisee uses with its employees. That is different from the franchisor’s personnel deciding that their employee is training, regularly directing the employee’s shift, evaluating the employee’s performance, and deciding what happens when the employee fails.

The cases are illustrations, not a universal code

Two decisions are often cited because they show how courts have separated brand standards from employment authority. They should be used carefully, not waved around as though they resolve every joint-employer question under every federal statute.

In Patterson v. Domino’s Pizza, LLC, the California Supreme Court considered employment and agency issues arising from a harassment claim. The court emphasized the franchisee’s day-to-day authority over hiring, supervision, discipline, discharge, and workplace behavior, while recognizing that the franchisor could still be liable if it retained or assumed the relevant general control.[4]

In Salazar v. McDonald’s Corp., the Ninth Circuit applied California wage law and concluded that McDonald’s brand standards, training, and operating systems did not make it the employer where the franchisee selected and hired workers, set wages and schedules, supervised employees, and made disciplinary decisions. The case also shows why facts matter: the plaintiffs challenged technology and system settings that they said contributed to wage violations. The court did not hold that technology can never matter; it held that the record did not make McDonald’s their employer under the applicable California tests.[5]

That is the right way to use these cases. They demonstrate a distinction; they do not eliminate the risk of joint employment or inquiry.

Technology can cross the line — but not merely by existing

Modern franchise systems use scheduling platforms, payroll interfaces, learning systems, customer service tools, artificial intelligence, and increasingly detailed data. Critics are correct about one thing: control can be exercised through a screen as easily as through a district manager standing in the store.

• If a franchisor locks the wage rate, dictates the employee’s schedule, prevents the franchisee from changing an unlawful setting, selects the person to be fired, or uses mandatory software to make the actual employment decision, the analysis should follow the conduct.

Calling it “technology” does not make it harmless. But offering a scheduling tool is not the same thing as writing the schedule. Providing a model handbook is not the same thing as enforcing local discipline. Recommending a staffing range is not the same thing as selecting particular employees. DOL’s 2026 proposal reflects some of this nuance: it treats actual exercise of control as more important than reserved authority, recognizes that mandatory indirect directions may matter, and states that ordinary business models and practices should not decide joint-employer status in the abstract.[6] The American Franchise Act goes further for franchising by choosing a clearer statutory line. Congress is entitled to make that choice.

Uncertainty has an operating cost

I have watched franchisors turn useful support into a risk-management exercise. A field consultant sees a franchisee struggling with staffing or supervision and is told to say less, document more, and stay away from anything that might later be described as employment involvement. The lawyer’s advice may be prudent but it results in a poor operating result and a franchisee whose equity in their business — what they saved a lifetime for — is damaged.

An unclear standard rewards mistakes. The franchisor that provides less training, less compliance help, fewer tools, and less candid operational guidance may reduce its litigation risk. The franchisee is left with less of the support that justified their buying the franchise in the first place.

Congress should not create an incentive for franchisors to become professionally unhelpful. It should hold them responsible when they act as employers — and allow them to support independent owners when they do not.

This is the second in a series of articles about the American Franchise Act. Part One describes the American Franchise Act. Part Three will examine the progressive case against franchising — and why it is neither convincing nor correct.

Michael Seid is Managing Director of MSA Worldwide. You can reach him at mseid@msaworldwide.com or 860-523-4257.

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[1]  National Labor Relations Board, “The Standard for Determining Joint-Employer Status-Final Rule Published 10/27/2023,” updated Feb. 27, 2026; Chamber of Commerce of the United States v. NLRB, 723 F. Supp. 3d 498, 519 (E.D. Tex. 2024).

[2]  U.S. Department of Labor, Wage and Hour Division, “Questions and Answers-NPRM: Joint Employer Status Under the FLSA, FMLA, and MSPA,” Apr. 22, 2026. DOL states that generally applicable FLSA guidance has been absent since 2021 and that applicable judicial precedent varies among the federal circuits.

[3]  Amendment in the Nature of a Substitute to H.R. 5267, § 3(a), proposed NLRA § 20(a)(1)–(4) (July 17, 2026).

[4]  Patterson v. Domino’s Pizza, LLC, 60 Cal. 4th 474, 503–04 (2014). Patterson involved California employment and agency principles in a harassment and vicarious-liability setting, not a universal federal joint-employer test.

[5]  Salazar v. McDonald’s Corp., 944 F.3d 1024, 1028–32 (9th Cir. 2019). The court applied California wage-order definitions and common-law principles.

[6]  U.S. Department of Labor, Wage and Hour Division, “Questions and Answers-NPRM: Joint Employer Status Under the FLSA, FMLA, and MSPA,” questions 18–20 (Apr. 22, 2026). The proposal treats actual control as more relevant than reserved authority, recognizes that mandatory indirect direction may matter, and states that identified business models and practices should not decide status in the abstract.