American Franchise Act

The American Franchise Act preserves the franchise business model by clarifying when a franchisor can be considered a joint employer of a franchisee's employees. It amends the National Labor Relations Act and the Fair Labor Standards Act to set a high standard for joint employer status, requiring the franchisor to exercise substantial direct and immediate control over essential terms of employment.

Sec. 3, Clarification of joint employment for franchising: The bill adds new sections to both the National Labor Relations Act and the Fair Labor Standards Act. Under these new sections, a franchisor is a joint employer only if it possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment (wages, benefits, hours, hiring, discharge, discipline, supervision, direction). The bill defines each term narrowly, listing actions that do not count as direct and immediate control, such as setting brand standards, offering training materials, or recommending staffing changes. The definition of franchise, franchisee, and franchisor comes from FTC regulations and the Petroleum Marketing Practices Act.

Sec. 4, Applicability: The bill and its amendments do not apply to any legal proceeding that started before the date the bill becomes law.