No official summary available for this bill.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 3525 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 3525
To preserve the franchise business model.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
December 17, 2025
Mr. Marshall (for himself, Mr. King, Mr. Lankford, Mr. Sheehy, and Ms.
Collins) introduced the following bill; which was read twice and
referred to the Committee on Health, Education, Labor, and Pensions
_______________________________________________________________________
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 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 appropriate levels 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 does not include permitting a
franchisee, under an arm's-length contract, to
participate in a benefits plan of the franchisor (such
as a health insurance plan, pension plan, or tuition
assistance).
``(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 or recommending changes
in staffing levels; 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; or
``(iii) 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 are limited and
routine;
``(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;
``(iv) establishing minimum training
requirements for the employees of a franchisee;
or
``(v) providing operational support,
guidance, and assistance to the franchisee to
promote and protect the brand's goodwill and
quality of products and services provided to
the consumer.
``(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'--
``(A) 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; and
``(B) notwithstanding subparagraph (A), include a
franchise, franchisee, and franchisor, respectively, as
defined in section 101 of the Petroleum Marketing
Practices Act (15 U.S.C. 2801).
``(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.
<all>
Introduced in Senate
Read twice and referred to the Committee on Health, Education, Labor, and Pensions.
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