Appeals court says Obama-era 'joint employment' labor test too broad

A panel of federal judges on Friday ruled against a 2015 decision from the National Labor Relations Board (NLRB) that made it easier to hold companies responsible for conduct by franchisees and contractors.

The U.S. Court of Appeals for the D.C. Circuit in a 2-1 ruling found the labor agency did not properly define the type of "indirect control" over working conditions that would make companies joint employers of franchise and contract workers, Reuters reports.

The appeals court said the Obama-era decision was too broad and ordered the agency to tighten its definition of "indirect control" over working conditions.

The ruling is a victory for business groups, including the Chamber of Commerce, that warned the rule would damage franchise business models in the U.S. 

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The case, brought by a California sanitation company, sought to determine whether the sanitation company was a joint employer for a recycling plant's workers, who were primarily employed by a staffing agency.

In September, the NLRB's current GOP majority appointed by President TrumpDonald John TrumpSenate GOP budget ignores Trump, cuts defense Trump says he'll nominate Stephen Moore to Fed White House: ISIS territory in Syria has been 100 percent eliminated MORE proposed a return to the previous standard, and Reuters reports that the board expects to adopt the rule by June.

Business groups celebrated that rule announcement, claiming that it would protect small businesses from lawsuits brought by workers hired by staffing agencies and other joint employment arrangements.

“The proposed rule should be adopted as soon as possible to protect small businesses from lawsuits brought by workers over whom they have no direct control," Alfredo Ortiz, president and CEO Job Creators Network, said in September.

Representatives for the U.S. Chamber of Commerce and the NLRB did not immediately return requests for comment from The Hill on Friday's ruling.