On February 26, 2026, the National Labor Relations Board (NLRB) published a final rule reinstating its prior 2020 Joint Employer final rule. This formally withdraws the NLRB’s 2023 standard for determining joint employer status, and signals a return to a narrower standard for determining when two unrelated companies will be held jointly liable for labor law violations.
What Was the 2023 Rule?
The 2023 Joint Employer rule, issued by the NLRB in October 2023, sought to broaden the conditions for which two unrelated companies could be liable for labor violations under the theory of joint employment. Under the 2023 standard, two entities could be deemed joint employers, and equally liable for the others’ labor law violations, if they shared or determined one or more “essential terms and conditions of employment,” such as wages, benefits, hours, hiring, discharge, discipline, supervision and direction. Diverging from decades of NLRB precedent on the subject, the 2023 final rule would find the existence of a joint employment relationship through the exercise of direct or indirect control over one of these essential terms and conditions of employment or by contractually reserved authority over the same, even if such authority was not actually exercised. This standard would make it easier for unions and employees to establish joint employer status, potentially increasing liability and bargaining obligations for businesses engaged in franchising, subcontracting, or vendor-on-premise staffing arrangements.
So, What is The 2020 Rule?
The 2020 Joint Employer final rule tightens the criteria for when two unrelated companies will be determined to be joint employers for labor law purposes. A party asserting joint employer status must prove the existence and actual exercise of substantial direct and immediate control over one or more essential terms and conditions of employment. Evidence of indirect control or contractually reserved authority is only relevant if it supplements direct and immediate control. Indirect or unexercised authority alone does not establish joint employer status. This standard makes it harder to classify companies as joint employers if one entity has little to no actual control over workers’ wages, benefits, hours, hiring, discharge, discipline, supervision and direction.
What Does This Mean for Employers?
Businesses should review their relationships with franchisees, subcontractors, and staffing agencies to ensure compliance with the reinstated 2020 Joint Employer final rule and carefully audit how much control it exercises over non-employee workers. Contracts between businesses should clearly define which entity is the employer of record and responsible for the essential terms and conditions of employment for workers. Businesses currently exploring options to retain the services of a subcontractor or staffing agency should look to limit provisions that could be interpreted as giving their company direct and immediate control over wages, benefits, hours, hiring, discipline, supervision, or direction of another entity’s employees and include indemnity language.
Authors: Michael J. Shoenfelt, Becca L. Hill, Alea R. Harris