Franchising is governed by trademark law which is enacted in the Lanham Act, 15 U.S.C. 1051 et seq. This law requires that franchisors police the use of their intellectual property licensed to third parties so that the brand is consistent and uniform to consumers. While trademark law requires franchisors and franchisees to enact controls to protect the brand, employment law penalizes franchises for establishing the same controls. For example, a hotel brand standard may require employees to wear branded uniforms so that every location looks the same to the public. However, the requirement of branded uniforms has been used as evidence of joint employment in litigation. As such, there is great uncertainty about what amount of control will trigger a finding that the franchisor is a “joint employer” over its franchisees’ employees. The Trademark Licensing Protection Act (“TLPA”) purports to resolve this finding by affirming that brand controls, as required by the Lanham Act, cannot be used as evidence of joint employment status under employment law.
The bill seeks to protect the franchise model by addressing the issue of what constitutes a joint employment relationship. It corrects a decision by the National Labor Relations Board in which the Board reversed a 30-year standard that a business needs “direct and immediate” control over their subcontracted businesses or franchisees. This ruling ultimately means that actions taken by a trademark owner to maintain brand standards may cause courts to consider the trademark owner a joint employer of a franchisee’s employees. This ruling ultimately means that actions taken by a trademark owner to maintain brand standards may cause court to consider the trademark owner a joint employer of a franchisee’s employees. This court make the trademark owner liable for wrongdoing committed by the franchisee.