American Franchise Act
- Bill Number
- S. 3525
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Labor and Employment
- Status
- Introduced
- Latest Action
- 2026-03-19: Committee on Health, Education, Labor, and Pensions. Hearings held.
- Last Updated
- 2026-03-30T18:22:45Z
AI-Generated Summary
Purpose of the Legislation
The American Franchise Act 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" of a franchisee's employees. This clarification seeks to prevent franchisors from facing unexpected labor liabilities due to their standard oversight of brand quality and operations, while recognizing franchisees as independent business owners.
Key Provisions
- Findings Section: Outlines the nature of franchising as a relationship where franchisees operate independently but follow franchisor standards for consistency, brand value, and consumer satisfaction. It highlights the model's economic contributions (e.g., $825 billion in output and 8.4 million jobs in 2022) and notes how unclear "joint employer" rules have threatened the model.
- Amendments to Labor Laws:
- Adds a new section to the National Labor Relations Act (NLRA, a law protecting workers' rights to unionize and bargain collectively) defining "direct and immediate control" over key employment aspects like wages, benefits, hours, hiring, firing, discipline, supervision, and work direction. This control is narrowly defined to exclude routine franchisor actions, such as setting brand standards, providing training, or offering operational guidance to protect the brand.
- Specifies that a franchisor is a joint employer under the NLRA only if it exercises "substantial direct and immediate control" (regular and ongoing influence, not isolated or minor) over one or more essential employment terms.
- Applies similar rules to the Fair Labor Standards Act (FLSA, a law on minimum wage, overtime, and child labor), using FLSA's definitions of "employee" and "employer" but aligning the joint employer criteria with the NLRA's new standards.
- Applicability: The changes do not affect any legal proceedings started before the law's enactment date.
Significant Changes to Existing Law
- Previously, courts and agencies like the National Labor Relations Board (NLRB) and Department of Labor (DOL) have sometimes treated franchisors as joint employers based on their brand oversight, leading to shared liability for labor violations (e.g., wage disputes or union issues). This bill narrows that by excluding typical franchise controls (like minimum staffing or training requirements) from counting as employer control, making it harder to classify franchisors as joint employers unless they directly manage day-to-day employee matters.
Potential Impacts
- On Government Agencies: The NLRB and DOL may see reduced joint employer claims against franchisors, potentially simplifying enforcement of labor laws but requiring updated guidance or rules to implement the new definitions.
- On Citizens (Workers and Consumers): Franchise employees might have fewer avenues to hold franchisors accountable in labor disputes, possibly limiting protections or remedies in cases like wage theft. Consumers could benefit indirectly from a stable franchise sector that maintains consistent quality.
- On Businesses: Franchisors gain clearer protections, encouraging investment and growth in the sector; franchisees retain operational independence without shared liabilities.
- On International Relations: Minimal direct impact, though it could influence how U.S. franchise models operate globally by reinforcing domestic legal stability.
Main Stakeholders Affected
- Franchisors (e.g., companies like McDonald's or Subway): Primary beneficiaries, as the law shields them from joint employer status based on standard practices.
- Franchisees (independent owners/operators): Supported by preserving their autonomy in managing employees and daily operations.
- Employees in Franchises (about 8.4 million workers): Potentially affected if it limits their ability to pursue claims against franchisors, though primary responsibility remains with franchisees.
- Labor Unions and Advocacy Groups: May face challenges in organizing or litigating across franchise networks.
- Government Agencies (NLRB, DOL): Must adapt enforcement to the new criteria, possibly reducing caseloads related to franchising.
Notable Legal, Constitutional, or Political Implications
- Legal Implications: Provides a clear, statutory test for joint employer status, reducing uncertainty from varying court and agency interpretations (e.g., past NLRB rulings like Browning-Ferris). This could lead to fewer lawsuits but might prompt challenges if seen as overly restrictive on worker rights.
- Constitutional Implications: None explicitly raised; the bill operates within Congress's authority to regulate commerce and labor under the Commerce Clause, without altering core rights like free speech or due process.
- Political Implications: Positions as pro-business legislation to bolster a key economic sector, introduced by Republican senators; could spark debate on balancing worker protections with entrepreneurial freedom, especially amid ongoing discussions on gig economy and labor standards.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (4)
Sen. King, Angus S., Jr. [I-ME], Sen. Lankford, James [R-OK], Sen. Sheehy, Tim [R-MT], Sen. Collins, Susan M. [R-ME]
Recent Actions
- 2026-03-19: Committee on Health, Education, Labor, and Pensions. Hearings held.
- 2025-12-17: Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
- 2025-12-17: Introduced in Senate
Bill Versions
- American Franchise Act — issued 2025-12-17 — PDF (10 pages)