The National Labor Relations Board has overturned a rule set during the Obama administration that made companies liable for the employees of their franchisees and contractors.
Groups representing industries including restaurants, retail and construction praised the decision, which was announced late Thursday. Unions and other worker advocacy groups derided the decision, which limits corporate liability in incidents such as labor law violations. Many companies use franchisees or contractors to cut costs and limit liability.
The NLRB decision reverses a 2015 standard set in a case involving now-disbanded waste management company Browning-Ferris Industries. That decision said that a company could be considered a joint employer _ alongside a franchisee _ even if it didn't have direct control of an employee.
In Thursday's 3-2 party-line vote, the board said parent companies have to exercise direct control over a group of employees to be held responsible for labor law violations with their franchisees.
The National Restaurant Association said the decision "restores years of established law and brings back clarity for restaurants and small businesses across the country."
Granger MacDonald, chairman of the National Association of Home Builders, said in a statement that the "Browning-Ferris decision in 2015 made the standard for joint employment so broad and vague that an employer could be held liable for the labor and employment practices of independent contractors and subcontractors over which they have no direct control."
But Christine Owens, executive director of the National Employment Law Project, a labor advocacy group, called the reversal "just one more example of the Trump administration favoring corporations over working people."
"In this economy, employers are increasingly subcontracting out vital parts of their business to other contractors and/or using temporary employment agencies to fill vital positions," she said. "Browning-Ferris rightly held these companies responsible for the labor standards under their own control. With this reversal, the Trump NLRB has decided to let them off the hook."
