The NLRB Restores 2020 Joint Employer Standard: What It Means for Employers

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Patricia Tsipras

April 13, 2026

February 25, 2026, the National Labor Relations Board (NLRB) issued a final rule withdrawing the 2023 joint employer regulation and reinstating the 2020 joint employer standard under the National Labor Relations Act (NLRA).  This move marks a significant return to a narrower and more predictable framework for determining joint employer status, providing clarity for businesses operating in multiemployer structures, such as staffing firms, franchise models, and subcontracting arrangements.

Background: The 2023 Rule and Its Withdrawal
The 2023 joint employer rule, which had sought to broaden the standard by allowing indirect or reserved control alone to establish joint employer status, was vacated by the U.S. District Court for the Eastern District of Texas in March 2024 as arbitrary and capricious.  The NLRB’s February 2026 action formally withdraws the 2023 rule and reinstates the 2020 standard, effectively restoring decades of precedent under the NLRA.

The Reinstated 2020 Joint Employer Standard
Under the reinstated 2020 rule, codified at 29 CFR 103.40, an entity is deemed a joint employer only if it possesses and exercises substantial direct and immediate control over one or more essential terms and conditions of employment of another employer’s employees.  This standard requires that the control exercised must have a regular or continuous consequential effect on the employment relationship, as opposed to sporadic, isolated, or de minimis control.

The essential terms and conditions of employment include wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.  Importantly, evidence of indirect control or contractually reserved but unexercised authority over these terms is only probative of joint employer status if it supplements and reinforces evidence of direct and immediate control.

Key Implications for Employers

• Higher Threshold for Joint Employer Status: The reinstated rule significantly narrows the circumstances under which an entity can be deemed a joint employer. This change reduces the risk of being held liable for collective bargaining obligations or unfair labor practices involving another employer’s employees.  For example, indirect control or merely setting operational goals without directly supervising or directing employees is insufficient to establish joint employer status.
• Clarity and Predictability: By reinstating the 2020 standard, the NLRB has provided businesses with a clearer framework for structuring their relationships with contractors, franchisees, and staffing agencies. This clarity is expected to encourage growth in industries that rely on such multiemployer arrangements.
• Reduced Liability Exposure: The narrower standard decreases the likelihood of parent companies or other entities being pulled into collective bargaining or facing liability for unfair labor practices. This standard is particularly beneficial for businesses that utilize third-party labor providers.
• Practical Considerations for Employers: Employers should review their contracts and operational practices to ensure compliance with the reinstated standard. Onsite managers, for instance, should avoid crossing the line from setting project goals to directly supervising or directing the work of third-party employees, as this could trigger joint employer liability.

The reinstatement of the 2020 joint employer standard represents a return to a more business-friendly framework under the NLRA.  Employers should take this opportunity to reassess their relationships with contractors, franchisees, and staffing agencies to ensure compliance with the reinstated rule.  By understanding and adhering to the requirements of 29 C.F.R. § 103.40, businesses can mitigate risks and maintain operational flexibility in their workforce arrangements.

This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice.  Always consult an attorney with specific legal issues.