American Franchise Act

The American Franchise Act aims to preserve the franchise business model by establishing a clear and narrow definition of a "joint employer" for franchisors. It proposes amendments to both the National Labor Relations Act and the Fair Labor Standards Act of 1938, seeking to address concerns that broad interpretations of joint employer liability have negatively impacted the viability of franchising. Under this legislation, a franchisor can only be considered a joint employer of a franchisee's employees if it possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment . The bill meticulously defines what constitutes "direct and immediate control" across various employment aspects, including wages, benefits, hours, hiring, discharge, discipline, supervision, and direction. Crucially, it explicitly excludes typical franchisor activities, such as setting brand standards or offering training materials, from being considered such control. The Act further clarifies that "substantial direct and immediate control" must have a regular or continuous consequential effect, rather than being sporadic, isolated, or de minimis. By setting these precise boundaries, the bill intends to differentiate between the necessary operational oversight inherent in a franchise relationship and the level of control that would warrant joint employer status. These changes would apply to new legal proceedings initiated after the bill's enactment, aiming to provide greater certainty and stability for the franchise industry.