US judge blocks rule extending labor law to franchisors

The U.S. Chamber of Commerce, which led a group of business groups challenging the rule, applauded the move. “This will prevent businesses from facing new liabilities related to workplaces they do not control and workers they do not actually employ,” Suzanne P. Clark, the chamber’s executive director, said in a statement.

Labor Commission Chair Lauren McFerran, who was appointed by President Biden, said in a statement that the decision was “a disappointing setback” but “not the final word” on the joint-employer standard. If the board appeals the decision, the case will go to the conservative U.S. Court of Appeals for the Fifth Circuit. The unemployment agency lobbied to have the case transferred to Washington, but Judge Barker denied the request.

The disputed rule, issued in October by the labor council's Democratic majority, would classify a parent company as a joint employer if it exercises control — direct or indirect — over even a single term of employment. The current standard, adopted in 2020 when the board was led by Republicans, classifies a company as a joint employer only if it has direct control over workers.

Nurses hired by a staffing agency, for example, may work at a hospital that determines their hours but does not directly establish their salary. If these nurses seek to unionize, they could argue that the hospital indirectly determines their pay based on how much it pays them to contract for their work. Under the rule published in October, the hospital would likely be considered a joint employer, but under the current standard it would be easier for it to argue that responsibility lies solely with the staffing agency that signs the paychecks of the nurses.

The new rule “would treat virtually all entities that engage in labor as a joint employer, because virtually all third-party employment contracts include terms that impact, at least indirectly, at least one of the “terms of “essential employment” specified. “Judge Barker wrote in his decision.

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