American Franchise Act

The American Franchise Act aims to establish a consistent federal definition for "joint employer" status within the franchise business model. Currently, the rules determining whether a large parent company (the franchisor) is responsible for the employees of a local branch (the franchisee) can change between different presidential administrations. This bill proposes to codify a specific standard into law to provide long-term regulatory certainty for small business owners and corporations.

Under the proposal, a franchisor would only be considered a joint employer if it exercises substantial, direct, and immediate control over essential aspects of employment, such as hiring, firing, wages, and daily supervision. The bill clarifies that providing brand standards, training materials, or operational guidance would not, by itself, make a franchisor legally liable for a franchisee’s labor decisions. This is intended to allow parent companies to maintain brand quality without being held responsible for the independent management of local staff.

If enacted, the bill would amend the National Labor Relations Act and the Fair Labor Standards Act. For everyday citizens, this could mean more stability for local franchise businesses, such as fast-food restaurants or fitness centers, by reducing legal confusion and potential litigation costs for owners. Supporters suggest it would encourage entrepreneurship by protecting the independence of local owners, while critics of similar measures often express concerns about how such standards might affect workers' ability to hold parent companies accountable for labor violations.