The National Labor Relations Board (“NLRB” or “the Board”) recently announced the readoption of the narrower 2020 joint employer rule (29 C.F.R. § 103.40) for determining joint employer status. Returning to the stricter standard reduces potential exposure, particularly for employers that contract with staffing agencies, vendors, and franchisees.
Under the National Labor Relations Act (“NLRA” or “the Act”), a company that is deemed a “joint employer” shares responsibility for bargaining obligations and labor law compliance. The designation carries significant weight as it can expose employers to additional administrative burdens. Liability risk can increase even where a company’s involvement in the underlying employment relationship is limited.
The Board’s action effectively restores the pre-2023 regulatory framework following several years of rapid shifts in the joint employer standard, providing employers with greater clarity, at least for the time being, when structuring staffing, vendor, and franchise relationships.
The Withdrawn 2023 Rule
In October 2023, the NLRB issued a rule broadening the scope for determining joint employer status. Under this expansion, employers could be considered joint based on either direct or indirect control over essential terms or conditions of employment, including wages, benefits, hours, hiring, discharge, discipline, supervision, and direction. The rule expanded the circumstances under which additional entities could be held liable for unfair labor practices committed by another employer.
Less than six months after the rule was published, a federal district court in Texas vacated it, holding that the rule was inconsistent with the Act and arbitrary and capricious. Following that decision, the NLRB formally withdrew the 2023 rule on February 27, 2026.
Readopting the 2020 Rule
The recent publication reinstating the 2020 Rule again applies the stricter joint employer standard. Using the 2020 framework, an entity is considered a joint employer only if it possesses and exercises “substantial direct and immediate control over one or more essential terms or conditions…” relating to employment. Notably, the 2020 rule does not permit joint employer liability based solely on indirect or reserved control.
This stricter standard makes it more difficult for employers to be found as joint employers. The party alleging joint employer status bears the burden of proof. Mere assertions or broad allegations are insufficient.
Moving Forward
Though the narrow standard minimizes potential liability, employers must continue to evaluate contracting relationships with staffing agencies, vendors, and franchisees. Employers should also remember that joint employer determinations remain highly fact-specific and may still arise where a company exercises direct control over another entity’s workforce. Best practice includes reviewing current contractual arrangements with vendors or staffing agencies and evaluating operational practices that could be interpreted as exercising direct control over another entity’s workforce. Employers should also consider training managers and supervisors who interact with contract or staffing-agency personnel to avoid inadvertently exercising direct control over hiring, discipline, scheduling, or supervision decisions.
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