119-hr5267

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5267 Introduced in House

    (IH) ]

<DOC>

119th CONGRESS
 1st Session
 H. R. 5267

 To preserve the franchise business model.

_______________________________________________________________________

 IN THE HOUSE OF REPRESENTATIVES

 September 10, 2025

Mr. Hern of Oklahoma (for himself, Mr. Davis of North Carolina, Ms. Van 
Duyne, Ms. Scholten, Mr. Edwards, Mr. Costa, Mr. Alford, Mr. Gray, Mr. 
 Pfluger, Mr. Cuellar, Mr. Moran, Mr. Bera, Mr. Vicente Gonzalez of 
 Texas, and Mr. Mackenzie) introduced the following bill; which was 
 referred to the Committee on Education and Workforce

_______________________________________________________________________

 A BILL

 To preserve the franchise business model.

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

 This Act may be cited as the ``American Franchise Act''.

SEC. 2. FINDINGS.

 Congress finds the following:

    (1) A franchise is a commercial relationship under which a 
 franchisee acquires the right to operate an independent 
 business that offers, sells, or distributes goods or services 
 using a franchisor's system of operations, which typically 
 includes the franchisor's business system and marketing plan, 
 and its service mark, trademark, trade dress, or trade name.

    (2) To protect the integrity of its system of operations, a 
 franchisor must set and enforce uniform quality, marketing, and 
 operational standards that govern its use. Doing so helps 
 maintain consistency and uniformity in the nature and quality 
 of the goods and services distributed under the franchisor's 
 trademarks. That consistency and uniformity, in turn, help 
 ensure that consumer expectations are satisfied, increase the 
 value of the franchisor's brand, and enhance the recognition 
 and profitability of individual franchises.

    (3) Although franchisees must comply with these standards, 
 franchisees are independent business owners. It is the 
 franchisee who determines how to implement the franchisor's 
 standards, controlling on a day-to-day basis the operations of 
 its franchise and its labor relations.

    (4) The economic impact of this business model has been 
 profound. According to a September 2023 report from Oxford 
 Economics, in 2022, the economic output of franchise 
 establishments in the United States was approximately 
 $825,000,000,000. During that year, franchises employed 
 approximately 5 percent of all workers in the United States, 
 which was approximately 8,400,000 workers.

    (5) Inconsistent and expansive views of what constitutes a 
 ``joint employer'' have impacted the viability of franchising 
 by creating joint employer liability based on the franchisor's 
 exercise of control that is inherent in franchise 
 relationships.

SEC. 3. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

    (a) National Labor Relations Act.--The National Labor Relations Act 
(29 U.S.C. 151 et seq.) is amended by adding at the end the following:

``

SEC. 20. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

 ``

    (a) 

=== Definitions. ===
-In this section:
 ``

    (1) Direct and immediate control.--The term `direct and 
 immediate control' means the following with respect to each 
 respective essential term and condition of employment:
 ``
        (A) Wages.--A franchisor exercises direct and 
 immediate control over wages if it actually determines 
 the wage rates, salary, or other rate of pay that is 
 paid to individual employees of a franchisee or job 
 classifications of employees of a franchisee.
 ``
        (B) Benefits.--A franchisor exercises direct and 
 immediate control over benefits if it actually 
 determines the fringe benefits to be provided or 
 offered to a franchisee's employees. Such direct and 
 immediate control--
 ``
            (i) includes selecting the benefit plans 
 (such as health insurance plans and pension 
 plans) or level of benefits provided to a 
 franchisee's employees; and
 ``
            (ii) does not include permitting a 
 franchisee, under an arm's-length contract, to 
 participate in a benefits plan of the 
 franchisor.
 ``
            (C) Hours of work.--A franchisor exercises direct 
 and immediate control over hours of work if it actually 
 determines work schedules or the work hours, including 
 overtime, of a franchisee's employees. Such direct and 
 immediate control does not include--
 ``
            (i) establishing a franchisee's operating 
 hours; or
 ``
            (ii) establishing minimum staffing levels 
 to satisfy the franchise's service standards.
 ``
            (D) Hiring.--A franchisor exercises direct and 
 immediate control over hiring if it actually determines 
 which particular employees will be hired or which 
 employees will not be hired. Such direct and immediate 
 control does not include--
 ``
            (i) encouraging, recommending, or 
 requesting changes in staffing levels to 
 accomplish tasks; or
 ``
            (ii) setting minimal recruiting and 
 hiring standards, such as those required by 
 law, for consumer or employee safety, or for 
 brand protection.
 ``
        (E) Discharge.--A franchisor exercises direct and 
 immediate control over discharge if it actually decides 
 to terminate the employment of an employee of a 
 franchisee. Such direct and immediate control does not 
 include--
 ``
            (i) bringing misconduct or poor 
 performance to the attention of a franchisee 
 that makes the actual discharge decision;
 ``
            (ii) expressing a negative opinion of a 
 franchisee's employee; or
 ``
            (iii) setting minimal standards of 
 performance or conduct, such as those required 
 by law, for consumer or employee safety, or for 
 brand protection.
 ``
        (F) Discipline.--A franchisor exercises direct 
 and immediate control over discipline if it actually 
 decides to suspend or otherwise discipline a 
 franchisee's employee. Such direct and immediate 
 control does not include--
 ``
            (i) bringing misconduct or poor 
 performance to the attention of a franchisee 
 that makes the actual disciplinary decision;
 ``
            (ii) expressing a negative opinion of a 
 franchisee's employee;
 ``
            (iii) refusing to allow a franchisee's 
 employee to perform work under a franchise 
 offer or contract; or
 ``
            (iv) setting minimal standards of 
 performance or conduct, such as those required 
 by law, for consumer or employee safety or for 
 brand protection.
 ``
        (G) Supervision.--A franchisor exercises direct 
 and immediate control over supervision by consistently 
 and directly instructing a franchisee's employees how 
 to perform their work or by actually issuing employee 
 performance appraisals. Such direct and immediate 
 control does not include--
 ``
            (i) providing instructions to a 
 franchisee's employees that--
 ``
            (I) are limited and routine; and
 ``
            (II) consist primarily of telling 
 a franchisee's employees what work to 
 perform, or where and when to perform 
 the work, but not how to perform the 
 work;
 ``
            (ii) setting brand standards for the 
 performance of the work;
 ``
            (iii) offering training materials 
 (including training demonstrations) for a 
 franchisee to use to train the employees of the 
 franchisee; or
 ``
            (iv) establishing minimum training 
 requirements for the employees of a franchisee.
 ``
        (H) Direction.--A franchisor exercises direct and 
 immediate control over direction by assigning 
 particular employees of a franchisee their individual 
 work schedules, positions, and tasks. Such direct and 
 immediate control does not include offering resources 
 and tools for a franchisee to consider using to direct 
 the work schedules, positions, and tasks of the 
 employees of the franchisee.
 ``

    (2) Essential terms and conditions of employment.--The 
 term `essential terms and conditions of employment' means 
 wages, benefits, hours of work, hiring, discharge, discipline, 
 supervision, and direction.
 ``

    (3) Franchise; franchisee; franchisor.--The terms 
 `franchise', `franchisee', and `franchisor' have the meanings 
 given such terms in 

section 436.1 of title 16, Code of Federal 
 Regulations, as in effect on the date of enactment of this 
 section.
 ``

    (4) Substantial direct and immediate control.--The term 
 `substantial direct and immediate control'--
 ``
        (A) means direct and immediate control that has a 
 regular or continuous consequential effect on an 
 essential term and condition of employment of a 
 franchisee's employees; and
 ``
        (B) does not include direct and immediate control 
 that is only exercised on a sporadic, isolated, or de 
 minimis basis.
 ``

    (b) Joint Employment.--For the purposes of this Act, a franchisor 
may be considered a joint employer of the employees of a franchisee 
only if the franchisor possesses and exercises substantial direct and 
immediate control over one or more essential terms and conditions of 
employment of the employees of the franchisee.''.

    (b) Fair Labor Standards Act of 1938.--The Fair Labor Standards Act 
of 1938 (29 U.S.C. 201 et seq.) is amended by adding at the end of the 
following:

``

SEC. 20. CLARIFICATION OF JOINT EMPLOYMENT FOR FRANCHISING.

 ``

    (a) In General.--For purposes of this Act, a franchisor may be 
considered a joint employer of the employees of a franchisee only if 
the franchisor meets the criteria for a joint employer with a 
franchisee under 

section 20 of the National Labor Relations Act, except 
that, for purposes of determining joint-employer status under this Act, 
the terms `employee' and `employer' referenced in 

section 20 of the 
National Labor Relations Act shall have the meanings given such terms 
in 

section 3 of this Act.''.
 ``

    (b) 

=== Definitions. ===
-In this section, the terms `franchisor' and 
`franchisee' have the meanings given such terms in 

section 20

    (a) of the 
National Labor Relations Act.''.

SEC. 4. APPLICABILITY.

 This Act, and the amendments made by this Act, shall not apply to 
any proceeding that is commenced before the date of enactment of this 
Act.
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