American Franchise Act
- Bill Number
- H.R. 5267
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Labor and Employment
- Status
- Introduced
- Latest Action
- 2025-09-10: Referred to the House Committee on Education and Workforce.
- Last Updated
- 2026-07-07T08:05:50Z
AI-Generated Summary
Purpose
The American Franchise Act (H.R. 5267) aims to protect and preserve the franchise business model by clarifying when a franchisor (the company that grants franchise rights) can be considered a "joint employer" (sharing legal responsibility for employees) with a franchisee (the independent business owner operating the franchise). It seeks to prevent overly broad interpretations of joint employer status that could impose undue liability on franchisors for routine oversight of brand standards, thereby supporting the economic contributions of franchising.
Key Provisions
- Findings Section: Outlines the nature of franchising as a relationship where franchisees operate independently using the franchisor's system, trademarks, and standards. It highlights the model's economic value (e.g., $825 billion in U.S. output and 8.4 million jobs in 2022) and notes risks from expansive "joint employer" definitions that treat franchisor controls as employment oversight.
- Clarification of Joint Employment:
- Amends the National Labor Relations Act (NLRA, which protects workers' rights to organize unions) and the Fair Labor Standards Act (FLSA, which sets minimum wage, overtime, and child labor standards).
- Defines "direct and immediate control" over "essential terms and conditions of employment" (wages, benefits, hours, hiring, firing, discipline, supervision, and direction). This control must be actual and specific (e.g., setting exact wages or firing decisions) and excludes routine franchisor actions like:
- Setting brand standards, operating hours, or minimum staffing for quality/safety.
- Providing training materials, recommendations on staffing, or feedback on performance.
- Allowing franchisees to join franchisor benefit plans under a standard contract.
- Introduces "substantial direct and immediate control" as regular or ongoing influence, not isolated or minor instances.
- A franchisor is a joint employer only if it possesses and exercises substantial direct and immediate control over one or more essential employment terms of the franchisee's employees.
- Applicability: The law does not apply to legal proceedings (e.g., lawsuits or investigations) started before its enactment date.
Significant Changes to Existing Law
- Narrows the NLRA and FLSA's joint employer standards specifically for franchising, overriding broader interpretations (e.g., from past court or agency rulings) that could deem franchisors joint employers based on brand enforcement alone.
- Shifts from potentially vague, case-by-case assessments to clear, defined criteria that emphasize franchisee independence in day-to-day operations and labor decisions.
- Aligns FLSA's joint employer rules with the new NLRA definitions, ensuring consistency across federal labor laws, but uses FLSA's own meanings for "employee" and "employer."
Potential Impacts
- On Government Agencies: The National Labor Relations Board (NLRB, enforces NLRA) and Department of Labor (DOL, enforces FLSA) may see reduced joint employer claims against franchisors, simplifying enforcement and investigations but potentially limiting worker protections in franchise settings.
- On Citizens: Franchisees gain clearer autonomy in managing employees, potentially stabilizing their businesses and job creation (benefiting the 8.4 million franchise workers). Employees may face hurdles in holding franchisors accountable for labor violations unless direct control is proven, which could affect union organizing or wage claims.
- On International Relations: Minimal direct impact, though it may influence U.S. franchise brands operating abroad by reinforcing the model's viability and attractiveness for global expansion.
Main Stakeholders Affected
- Franchisors (e.g., companies like McDonald's or Subway): Primary beneficiaries, as they avoid joint liability for franchisee employment issues tied to brand standards.
- Franchisees: Supported through preserved independence, reducing risks of shared legal burdens that could raise costs or disrupt operations.
- Employees and Labor Unions: Potentially disadvantaged, as it limits avenues to treat franchisors as co-employers for collective bargaining, wage disputes, or overtime claims.
- Small Businesses and Economy: Broader franchise sector gains stability, fostering job growth and economic output in industries like food service and retail.
- Government and Courts: Agencies like NLRB and DOL must adapt to stricter criteria; courts may see fewer ambiguous joint employer cases.
Notable Legal, Constitutional, or Political Implications
- Legal: Reinforces contract-based distinctions between franchisors and franchisees, potentially preempting state laws or future agency rules expanding joint employer liability. It may invite challenges under the Administrative Procedure Act if seen as unduly limiting agency discretion.
- Constitutional: No direct conflicts, but could raise due process concerns if viewed as restricting workers' access to remedies under federal labor laws; aligns with Commerce Clause authority over interstate business models.
- Political: Favors business interests by countering recent trends toward broader worker protections (e.g., under prior administrations), likely appealing to pro-franchise lawmakers while drawing criticism from labor advocates for weakening employee rights. Bipartisan sponsorship (from both parties) suggests cross-aisle support for economic preservation over ideological labor reforms.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (134)
Rep. Davis, Donald G. [D-NC-1], Rep. Van Duyne, Beth [R-TX-24], Rep. Scholten, Hillary J. [D-MI-3], Rep. Edwards, Chuck [R-NC-11], Rep. Costa, Jim [D-CA-21], Rep. Alford, Mark [R-MO-4], Rep. Gray, Adam [D-CA-13], Rep. Pfluger, August [R-TX-11], Rep. Cuellar, Henry [D-TX-28], Rep. Moran, Nathaniel [R-TX-1], Rep. Bera, Ami [D-CA-6], Rep. Gonzalez, Vicente [D-TX-34], Rep. Mackenzie, Ryan [R-PA-7], Rep. Meuser, Daniel [R-PA-9], Rep. Carter, Earl L. "Buddy" [R-GA-1], Rep. Kiley, Kevin [R-CA-3], Rep. Bean, Aaron [R-FL-4], Rep. Harrigan, Pat [R-NC-10], Rep. Williams, Roger [R-TX-25], Rep. Carter, Troy A. [D-LA-2], Rep. Van Orden, Derrick [R-WI-3], Rep. Sessions, Pete [R-TX-17], Rep. Fitzgerald, Scott [R-WI-5], Rep. Bentz, Cliff [R-OR-2], Rep. Bice, Stephanie I. [R-OK-5], Rep. Foxx, Virginia [R-NC-5], Rep. Baumgartner, Michael [R-WA-5], Rep. Kustoff, David [R-TN-8], Rep. Olszewski, Johnny [D-MD-2], Rep. Schmidt, Derek [R-KS-2], Rep. Fong, Vince [R-CA-20], Rep. Gottheimer, Josh [D-NJ-5], Rep. Cole, Tom [R-OK-4], Rep. Peters, Scott H. [D-CA-50], Rep. Barr, Andy [R-KY-6], Rep. Grothman, Glenn [R-WI-6], Rep. Harder, Josh [D-CA-9], Rep. Fleischmann, Charles J. "Chuck" [R-TN-3], Rep. Yakym, Rudy [R-IN-2], Rep. McGuire, John J. [R-VA-5], Rep. Carey, Mike [R-OH-15], Rep. Kelly, Mike [R-PA-16], Rep. Thompson, Glenn [R-PA-15], Rep. Smucker, Lloyd [R-PA-11], Rep. Wied, Tony [R-WI-8], Rep. Amodei, Mark E. [R-NV-2], Rep. Feenstra, Randy [R-IA-4], Del. King-Hinds, Kimberlyn [R-MP-At Large], Rep. Moolenaar, John R. [R-MI-2], Rep. Taylor, David J. [R-OH-2] and 84 more
Recent Actions
- 2025-09-10: Referred to the House Committee on Education and Workforce.
- 2025-09-10: Introduced in House
- 2025-09-10: Introduced in House
Bill Versions
- American Franchise Act — issued 2025-09-10 — PDF (10 pages)