WASHINGTON – In a 3-2 vote along party lines, the National Labor Relations Board (NLRB) overturned an Obama-era ruling that held franchisors and other businesses liable for labor and wage violations committed by franchisees and subcontractors.

In a news release, the NLRB said, “In all future and pending cases, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine.” 

Proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine, the NLRB said, will not be sufficient to establish a joint-employer relationship.  NLRB Chairman Philip A. Miscimarra was joined by Marvin E. Kaplan and William J. Emanuel in the majority opinion. Members Mark Gaston Pearce and Lauren McFerran cast dissenting votes.

In 2014, the NLRB classified Oakbrook, Illinois-based McDonald’s Corp. as a joint employer, a ruling the quick-service chain challenged in federal court. The board’s decision at the time followed an investigation into charges that McDonald’s and the chain’s franchisees had violated the rights of employees during pro-labor rallies for higher wages for fast-food workers. Some workers who joined the rallies said they were illegally fired, punished or threatened for participating in the protests.

Angelo Amador, vice president Labor and Workforce Policy for the National Restaurant Association (NRA) protested the decision, say at the time “…making franchisors liable for their franchisees’ employment practices and redefining individually owned franchises as ‘big business,’ NLRB would disrupt the franchisor/franchisee relationship and impede entrepreneurship and restaurants’ ability to continue to create jobs, particularly in an increasingly challenging economic environment.”