A U.S. labor board on Thursday issued a final rule making it easier for workers and unions to hold companies liable for labor law violations by their franchisees and contractors, reviving an Obama-era standard heavily criticized by trade groups.
The rule from the National Labor Relations Board (NLRB) will treat companies as so-called "joint employers" when they have control, even if it is indirect or not exercised, over essential terms and conditions of employment such as pay, scheduling, hiring and firing, and supervision.
A company that is found to be a joint employer would likely be forced to become more involved in setting and implementing workplace policies, and could be required to bargain with unions.
The rule takes effect on Dec. 26 and will only be applied to cases filed after that date.
Several business groups on Thursday expressed opposition to the rule, and the U.S. Chamber of Commerce, the nation's largest business lobbying group, said it was exploring litigation to challenge it.
Glenn Spencer, vice president of the Chamber's employment policy division, said in a statement that it "defies common sense to say that businesses can be held liable for workers they don't employ at workplaces they don’t own or control."
Joint employment has been one of the most contentious labor issues for many U.S. businesses since the Obama administration, when the NLRB had adopted a similar standard that trade groups said was unworkable and would curb franchising.
The new rule eliminates a regulation adopted during the Trump administration that was favored by business groups requiring companies to have "direct and immediate" control over contract and franchise workers in order to be considered joint employers.
NLRB Chair Lauren McFerran in a statement called the new rule "a legally correct return to common-law principles" and a practical approach to ensure that the entities that effectively exercise control over workers' terms of employment respect their bargaining obligations.
The Democratic-controlled board approved the rule on a 3-1 vote. Its lone Republican member, Marvin Kaplan, in a dissenting opinion called the rule an "unprecedented and unwarranted expansion of the Board’s joint-employer doctrine."
The rule will broadly affect industries such as manufacturing and construction that rely heavily on staffing agencies and contractors to provide workers, and franchises such as McDonald's (MCD.N) that are not typically involved in franchisees' day-to-day workplace issues.
Business groups have said the rule would further complicate collective bargaining, making it more difficult for unions to negotiate contracts with businesses and undermining the NLRB's stated goal of strengthening workers' rights.
Supporters of the new rule, including labor unions, have said the change is necessary because of an uptick in the use of contract labor, including workers provided by staffing agencies, in recent years.
Worker advocates say companies have avoided being held accountable for labor violations under the more lax standard adopted during the Trump administration.
