The NLRB joint employer rule has been a hotly contested subject in recent years. For employers that operate in franchising, staffing, subcontracting, or other multi-entity business models, “joint employer” status is more than a technical legal term. It can determine whether your company must bargain with a union, whether you may be liable for another entity’s unfair labor practices, and whether you share responsibility for workplace policies you do not directly administer. On February 26, 2026, the National Labor Relations Board formally withdrew its 2023 joint employer rule and reaffirmed the prior 2020 standard.
What Is “Joint Employer” Status?
The NLRB enforces the National Labor Relations Act (NLRA), which governs private-sector union organizing, collective bargaining, and unfair labor practices. Under the NLRA, two legally separate companies can sometimes be treated as “joint employers” of the same group of employees.
If that happens both entities may:
- have a duty to bargain with a union.
- be held liable for unfair labor practices.
- be subject to Board orders and remedies.
Joint employer findings most commonly arise in:
- Franchise relationships
- Staffing agency arrangements
- Contractor–subcontractor models
- Management company structures
- Private equity portfolio structures
The central legal question is whether the two entities “share or codetermine” essential terms and conditions of employment.
The Regulatory Back-and-Forth
The joint employer standard has oscillated for years, moving between broader and narrower interpretations depending on Board composition and judicial review.
The 2020 NLRB Joint Employer Rule (Narrower Standard)
In 2020, the NLRB (with a Republican majority under the first Trump administration) issued a rule requiring that an entity both possess and exercise “substantial direct and immediate control” over one or more essential terms and conditions of employment to qualify as a joint employer.
Indirect influence or unexercised contractual authority was relevant only if it supplemented actual direct control.
The 2023 NLRB Joint Employer Rule (Broader Standard)
In October 2023, the Board (under President Biden) issued a new rule intended to replace the 2020 framework with a broader standard. That rule would have expanded the relevance of indirect control and contractually reserved authority. However, the rule was challenged in federal court.
The Court’s Vacatur and the 2026 Withdrawal
In March 2024, the U.S. District Court for the Eastern District of Texas vacated the 2023 rule in Chamber of Commerce v. NLRB, No. 723 F.Supp. 3d 498, 519 (E.D. Tex. 2024). As the Board’s recent Federal Register notice confirms, because the rule was vacated before taking effect, the 2020 rule “remains the operative rule for determining joint employer status.”
The Board’s current action is largely procedural. It formally replaces the vacated regulatory text with the 2020 version so the Code of Federal Regulations reflects what was already in practical effect. Nonetheless, it is a meaningful signal from the newly constituted Republican Board majority.
What NLRB Joint Employer Rule Applies Now?
The governing rule is again codified at 29 CFR § 103.40.
Under that standard:
An entity is a joint employer only if it shares or codetermines essential terms and conditions of employment and possesses and exercises substantial direct and immediate control over those terms.
The regulation identifies “essential terms and conditions” as including:
- Wages
- Benefits
- Hours of work
- Hiring
- Discharge
- Discipline
- Supervision
- Direction
Direct control means actually determining those matters—not merely setting contract objectives or maintaining quality standards.
The rule also clarifies that:
- Indirect control can be considered, but only if it reinforces evidence of direct control.
- Reserved but unexercised contractual authority alone is not enough.
- Control must be “substantial,” meaning regular or consequentia—not sporadic or de minimis.
For employers accustomed to the 2020 framework, the landscape returns to what has technically been in place since that rule’s adoption. But it provides greater certainty as long as the current Board majority remains in control.
Practical Implications for Employers under the 2020 NLRB Joint Employer Rule
1. Contract Drafting Still Matters
Although unexercised reserved authority alone is insufficient under the 2020 rule, it can still be “probative” when combined with direct control.
Well-drafted agreements should:
- Clarify that the contractor or franchisee retains sole authority over hiring, discipline, and compensation.
- Avoid giving the upstream entity discretionary authority over day-to-day employment decisions unless operationally necessary.
- Distinguish between setting performance standards and controlling how work is performed.
2. Operational Reality Matters More Than Paper
The rule focuses on the actual exercise of direct control.
If managers from one entity:
- directly discipline another entity’s employees;
- issue performance evaluations;
- determine individual wage rates; or
- assign schedules and tasks;
those actions can create joint employer exposure, even if contracts say otherwise.
3. Staffing Arrangements Require Careful Boundaries
For companies that use staffing agencies, the dividing line often turns on what entity sets pay rates, decides to terminate assignments, controls schedules, and issues discipline.
Refusing to allow an assigned worker back on-site is not automatically “direct control” over discharge under the NLRB joint employer rule. But repeated involvement in personnel decisions can shift the analysis.
4. Franchisors: Quality Control Is Not Automatically Employee Control
The regulation distinguishes between:
- Setting brand standards or operational objectives; and
- Directly controlling how employees perform their work.
Routine brand standards do not automatically create joint employer status. However, close involvement in personnel management can.
Will This Be the Final Word?
Probably not.
Joint employer doctrine has been one of the most politically sensitive areas of federal labor law. It has shifted through Board decisions, rulemaking, and court review for many years.
Several realities remain:
- Board composition can change with administrations.
- Future rulemaking is possible.
- Judicial review continues to shape boundaries.
Employers operating in complex labor structures should expect continued scrutiny in this area, but have more certainty under the NLRA as long as the 2020 NLRB joint employer rule remains expressly in effect.
Key Takeaways
- The 2023 NLRB joint employer rule has been formally withdrawn after being vacated in federal court two years ago.
- The 2020 NLRB joint employer rule “remains” in effect.
- Joint employer status requires substantial direct and immediate control over essential terms of employment.
- Indirect or unexercised authority alone is insufficient.
- Operational practices—not just contract language—drive risk.
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