U.S. Judge Blocks Rule Extending Reach of Labor Law to Franchisers

A federal judge, siding with business lobbying groups, has blocked a rule that would broaden the reach of federal labor law to make big franchisers like McDonald’s responsible for the conditions of workers they have not directly hired.

The judge, J. Campbell Barker of the United States District Court for the Eastern District of Texas, on Friday vacated a rule issued by the National Labor Relations Board determining when a company is a joint employer, making it liable under labor law for the working conditions of those hired by a franchisee or provided by a staffing agency. He said the rule, which was to go into effect Monday, was too broad.

The decision by Judge Barker, a nominee of former President Donald J. Trump, keeps in place a more business-friendly standard for assigning legal liability.

Unions and employees support the rule because it makes it easier to bargain for better conditions, while franchisers say it would disrupt their business model.

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

The labor board’s chair, Lauren McFerran, who was named by President Biden, said in a statement that the ruling was “a disappointing setback,” but “not the last word” on the joint-employer standard. If the board appeals the ruling, the case would move to the conservative U.S. Court of Appeals for the Fifth Circuit. The labor agency pushed for the case to be moved to Washington, but Judge Barker denied that request.