American Franchise Act
- Sponsor
- Rep. Hern, Kevin [R-OK-1]
- Committees
- Education and Workforce Committee (primary)
- Last action
- Sep 8, 2026
Bottom line
The bill aims to limit franchisor liability as a joint employer by narrowly defining the conditions under which such a relationship exists, thereby preserving the traditional franchise business model.
What it actually does
This bill, the "American Franchise Act," amends the National Labor Relations Act and the Fair Labor Standards Act of 1938 to clarify the definition of a "joint employer" specifically for franchisor-franchisee relationships. It establishes that a franchisor is considered a joint employer of a franchisee's employees only if it exercises "substantial direct and immediate control" over one or more essential terms and conditions of employment, such as wages, benefits, hours, hiring, discharge, discipline, supervision, and direction, with detailed definitions for each.
Proponents argue
Supporters argue that the bill provides much-needed clarity and certainty for the franchise business model, which contributes significantly to the U.S. economy and employment. They contend that inconsistent and expansive interpretations of "joint employer" liability undermine the viability of franchising by penalizing franchisors for exercising necessary quality and brand control, thereby stifling job creation and small business ownership.
Opponents contend
Opponents might argue that by narrowing the definition of joint employer, the bill could reduce accountability for franchisors regarding labor practices and potentially make it harder for employees to seek redress for unfair labor practices or wage violations. They may contend that franchisors often exert significant de facto control over franchisees' operations, and this bill could shield them from responsibility.
The bill is concise, making it accessible for a quick read, but its legal definitions require careful consideration to grasp the full implications.
Section 1
Short Title: American Franchise Act
This section establishes the official short title of the bill as the "American Franchise Act," providing a common and easily recognizable name for the legislation.
Supporters argue
Supporters argue that a clear and concise short title helps in public discourse and legislative tracking, making the bill's purpose more accessible.
Critics contend
No specific opposition is typically raised against short title provisions, as they are primarily administrative.
Tradeoffs
None significant.
Section 2
Congressional Findings on Franchising
This section outlines Congress's findings regarding the franchise business model, defining a franchise, explaining the necessity of franchisor standards for brand integrity, asserting franchisees' independence as business owners, detailing the economic impact of franchising in the U.S., and noting the negative impact of "inconsistent and expansive views of what constitutes a 'joint employer'" on franchising viability.
Section 3(a)
Amends National Labor Relations Act Joint Employment Definition
This section adds a new Section 20 to the National Labor Relations Act, defining "direct and immediate control" for essential terms and conditions of employment (wages, benefits, hours, hiring, discharge, discipline, supervision, and direction). It specifies what actions by a franchisor do and do not constitute such control. Crucially, it states that a franchisor is a joint employer only if it possesses and exercises "substantial direct and immediate control" over one or more of these essential terms.
Section 3(b)
Amends Fair Labor Standards Act Joint Employment Definition
This section adds a new Section 20 to the Fair Labor Standards Act of 1938, stipulating that a franchisor may be considered a joint employer of a franchisee's employees only if it meets the criteria established in the amended National Labor Relations Act (NLRA) section. It clarifies that the terms "employee" and "employer" under FLSA will retain their FLSA meanings when applying the NLRA's joint employer criteria.
Section 4
Prospective Application of Amendments
This section specifies that the Act and its amendments will only apply to legal proceedings that commence after the date of its enactment. It explicitly excludes any proceedings initiated before this date from being affected by the new joint employer definitions.
This section provides highly specific definitions for what constitutes "direct and immediate control" by a franchisor over each of the eight "essential terms and conditions of employment" (wages, benefits, hours, hiring, discharge, discipline, supervision, and direction). For each term, it explicitly lists actions that do and do not qualify as direct and immediate control.
Section 3(a), new Section 20(a)(1) of the NLRA
Why it matters:This level of detail is standard legislative practice for defining complex legal terms and ensuring precise application. It is not evasive but requires careful reading.
Case for: Proponents argue that these precise definitions are essential to provide legal certainty for franchisors, allowing them to maintain brand standards without incurring joint employer liability. They prevent subjective interpretations that could lead to inconsistent enforcement.
Case against: Opponents might argue that by explicitly carving out many common franchisor activities (like setting operating hours, recommending staffing, or providing training materials) from "direct and immediate control," the bill effectively allows franchisors to influence labor conditions significantly without being held accountable as joint employers.
Estimated impact: This provision fundamentally reshapes the legal landscape for labor relations in the franchise sector, potentially affecting millions of workers and thousands of businesses by altering who can be held responsible for labor practices.