The D.C. Circuit Court of Appeals overruled the National Labor Relations Board, the main federal labor law enforcement agency, Friday in a closely watched case against CNN.

The court said the NLRB overreached when it said the cable news company was a "joint employer" with a company it had subcontracted with and therefore obligated to provide back pay to the subcontractor's workers.

The court said the board never offered a good explanation for why CNN should be considered a joint employer. "It provided no explanation whatsoever for the bargaining order it imposed. We are thus left with no choice but to grant CNN's petition on this point and remand for the board either to vacate the order or provide sufficient justification," said the order by a three-judge panel led by Merrick Garland, whom former President Barack Obama unsuccessfully nominated to fill the late Justice Antonin Scalia's seat on the Supreme Court.

Joint employer refers to when one business can be held legally liable for workplace violations at another business it works closely with. Traditionally, the standard only applied when one business had "direct control" over another's workforce. In 2014, the board expanded the rule to include "indirect control," a far more ambiguous standard that vastly expands the potential liability corporations face.

In the CNN case, the board argued that the company exerted enough control over Team Video Services, a staffing agency, that it became a joint employer. The board said the company ended the contract in 2003 "with the objective of depriving employees of [union] representation." It ordered CNN to provide back pay and benefits to the workers. The court overruled that by saying CNN was not the workers' employer.

The case was closely watched by business groups, which oppose the expanded joint employer standard. "The NLRB's controversial joint employer standard created uncertainty for small businesses. Today's decision brings us one step closer to having clarity that will assist businesses in their operations," said Angelo Amador, executive director of Restaurant Law Center, the legal arm of the National Restaurant Association.