(Reuters) - The U.S. agency that enforces federal labor laws took the first steps on Thursday towards loosening an Obama-era standard that made it easier to hold companies liable for illegal labor practices by their contractors and franchisees.

FILE PHOTO - A worker sits at his desk in an office building in Washington, U.S., August 3, 2018. REUTERS/Brian Snyder -

The five-member National Labor Relations Board, whose majority was appointed by President Donald Trump, proposed a rule that would restore an earlier standard. Under it, companies are considered to be so-called joint employers with their contractors or franchisees only when they exercised direct control over labor issues such as hiring or firing workers and setting wages.

In a 2015 decision involving California sanitation company Browning-Ferris Industries Inc, the NLRB had said a company could be a joint employer when it has indirect influence over the working conditions of a contractor’s employees. Joint employers can be held liable for labor law violations and be required to bargain with unions representing contract workers.

In that case, the board said Browning-Ferris was the joint employer of workers at a recycling plant who had been provided by a staffing agency and were seeking to join a union.

Overturning the Browning-Ferris standard has been a top priority of business groups including the U.S. Chamber of Commerce, the nation’s largest business lobby, which say the Obama-era ruling could upend supply chains and the franchise model.

Unions, worker advocates and many Democrats have said the standard the board created in 2015 was necessary because of a steady increase in the outsourcing of labor in many industries over the last few decades.

Thursday’s announcement was hailed by business groups and some Republicans in Congress. Robert Cresanti, president of the International Franchise Association, said the Obama-era decision had created confusion and uncertainty for franchise operators and the proposed rule would create “clear lines” for companies to follow.

The board said its proposal would be formally published on Friday, kicking off a 60-day public comment period.

The NLRB had overturned the Obama-era joint employment standard in a December ruling. But it wiped out that decision two months later because a board member appointed by Trump had a conflict of interest.

In June, NLRB Chairman John Ring, a Trump appointee, said that adopting a rule would provide a higher level of certainty to employers and unions than issuing a new decision.