The American Franchise Act clarifies when a franchisor (the company that owns a brand like McDonald's) can be held responsible as a joint employer for the wages, benefits, and working conditions of a franchisee's employees. The bill amends federal labor laws to establish that a franchisor is only a joint employer if it exercises "substantial direct and immediate control" over essential employment terms—meaning it must actually set wages, directly determine hiring decisions, or consistently supervise employees, not simply set brand quality standards or provide training materials. This distinction matters because currently, some labor agencies take broader views of "joint employer" that can expose franchisors to liability for labor violations at franchises they don't directly operate. The bill affects the approximately 8.4 million workers employed by franchises across the United States and is intended to protect the franchise business model, which generated about $825 billion in economic output in 2022. The legislation applies only to cases filed after it becomes law.
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