By Daniel Wiessner

Several major U.S. business groups sued a federal labor board on Thursday, seeking to strike down a rule treating many companies as employers of contract and franchise workers and requiring them to bargain with their unions.

The groups led by the U.S. Chamber of Commerce, the country's largest business lobby, said in a complaint filed in a Tyler, Texas federal court that the rule, which takes effect Dec. 26, violates U.S. labor law and improperly favors unions.

The groups said the rule will cost businesses billions of dollars and cause disruptions in an array of industries including retail, construction, hospitality and healthcare.

The rule issued by the National Labor Relations Board (NLRB) will treat companies as "joint employers" of contract and franchise workers when they have control over key working conditions such as pay, scheduling, discipline and supervision, even if it is indirect or not exercised.

Joint employers can be held liable for violating workers' rights to organize and can be made to bargain with unions representing contract or franchise employees.

"The new rule imposes joint-and-several liability on virtually every entity that hires contractors subject to routine parameters," the groups said in the complaint.

An NLRB spokeswoman declined to comment.

The court where the lawsuit was filed has two judges, both of whom were appointed by Republican former President Donald Trump.

President Joe Biden's administration has previously accused trade groups and Republican-led states of improperly "judge shopping" by filing similar challenges to federal government regulations in courts stocked with Trump appointees, particularly in Texas.

The NLRB rule replaces a Trump-era regulation requiring companies to have "direct and immediate" control over workers in order to be considered joint employers, which was favored by business groups.

The board in adopting the new rule said that approach was legally flawed and would prevent businesses from being held accountable for labor law violations.

The groups in Thursday's lawsuit said the rule was inconsistent with federal labor law's narrower definition of who counts as an employer.

They also said the labor board had failed to adequately explain its reversal of the Trump-era rule, in violation of the federal law governing rulemaking by federal agencies.

The U.S. Department of Labor in 2021 rescinded a separate Trump administration rule that had made it more difficult to prove that companies are joint employers under federal wage laws, which impose minimum wage and overtime requirements.

(Reporting by Daniel Wiessner in Albany, New York, Editing by Alexia Garamfalvi and David Gregorio)