The American Franchise Act (AFA) would clarify when a franchisor may be considered a joint employer of a franchisee’s employees under the Fair Labor Standards Act (FLSA) and the National Labor Relations Act (NLRA). The AFA would apply a clear federal standard to franchisor and franchisee relationships.

Under the AFA, a franchisor may be considered a joint employer only if it possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of the franchisee’s employees.

• Requires both authority and action: A franchisor must possess the authority to control and actually exercise substantial direct and immediate control before it may be considered a joint employer. The standard does not treat indirect, reserved, or potential control alone as sufficient.

• Focuses on essential employment terms: The test applies to essential terms and conditions of employment–including wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction—and specifies, term by term, what does and does not count as control over each in the franchise context. The AFA would focus on joint employer determinations on the employment decisions that directly govern a franchisee’s workforce.

• Protects franchisee independence: Franchisees independently hire their teams and run their businesses day to day. Franchisors provide brand consistency, training tools, and support.

• Allows brand support: Setting minimum standards for brand protection, including trademarks and intellectual property, and offering training materials or operational resources do not amount to direct and immediate control.

• Preserves accountability: The AFA does not make franchisors immune from a joint employer finding when they possess and exercise substantial direct and immediate control. In fact, the American Franchise Act spells out the circumstances in which a franchisor may be held jointly liable for violations of the NLRA and FLSA – including, for example where a franchisor actually determines the wage rates, benefits provided, work schedules or disciplinary action for a franchisee’s employees. Franchisees support the bill because it creates a clear line between brand protection and the day-to-day management of employees, which remains the sole prerogative of the independent franchisee.

• Source: https://www.franchise.org/advocacy/american-franchise-act/
• Source: https://www.franchise.org/wp-content/uploads/2026/05/AFA-Backgrounder-2026.pdf