“A bill to preserve the franchise business model.”
No CRS summary available for this bill.
This section states congressional findings concerning the franchise business model, including (1) its definition as a relationship granting franchisees rights to operate independently using a franchisor's system, standards, and trademarks; (2) franchisors' need for uniform quality, marketing, and operational standards to maintain brand consistency and value; (3) franchisees' independence in daily operations and labor relations; (4) its economic impact, with $825 billion in output and 8.4 million jobs (5% of U.S. workers) in 2022 per a September 2023 Oxford Economics report; and (5) adverse effects from inconsistent joint employer determinations imposing liability for inherent franchisor controls.
This section amends the National Labor Relations Act (29 U.S.C. 151 et seq.) and the Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.) to provide that a franchisor is a joint employer of a franchisee's employees only if the franchisor possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment (i.e., wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction) of those employees. As background, joint employer status under these statutes can impose shared liability on franchisors for franchisee employees' wages, overtime, union activities, and working conditions, as determined by the National Labor Relations Board or courts. The amendments define "direct and immediate control" separately for each essential term—such as actually determining individual wage rates or work schedules, or deciding to hire, discharge, or discipline specific employees—with exclusions for common franchisor activities (e.g., setting brand standards, minimum staffing or training requirements, providing routine instructions or training materials, or offering operational guidance to protect brand goodwill). "Substantial direct and immediate control" requires a regular or continuous consequential effect, excluding sporadic, isolated, or de minimis exercises of control. "Franchise," "franchisee," and "franchisor" incorporate definitions from 16 C.F.R. § 436.1 and the Petroleum Marketing Practices Act (15 U.S.C. § 2801), which governs motor fuel marketing contracts between refiners, distributors, and retailers. (Thus, the provision shields franchisors from joint employer status based on typical brand-protection measures.)