NLRB Withdraws 2023 Joint Employer Rule, Reinstates 2020 Standard in "Ministerial" Action

The National Labor Relations Board (NLRB) published a final rule on February 25, 2026, withdrawing its 2023 regulation titled "Standard for Determining Joint Employer Status" and formally readopting the 2020 joint employer standard into the Code of Federal Regulations at 29 C.F.R. § 103.40. The NLRB characterized this action as purely "ministerial," explaining that it merely conformed its regulations to a federal court's vacatur of the 2023 rule, rather than reflecting any discretionary choice among competing policy approaches.

For businesses operating through staffing firms, franchise models, subcontracting arrangements and other multiemployer structures, the reinstatement means the NLRB will continue to apply a relatively narrower standard that focuses on actual, substantial, direct and immediate control over key employment terms.

Background

The reinstated rule is the product of successive board compositions adopting different approaches to joint employer status. In 2015, the NLRB's Browning-Ferris Industries decision permitted the NLRB to find joint employer status based on indirect control over key employment terms. On February 26, 2020, the NLRB promulgated a final rule supplanting that approach with a narrower framework requiring substantial direct and immediate control over essential terms and conditions of employment.

Under the Biden Administration, the NLRB published a new rule in 2023 reasserting the Browning-Ferris approach, which would have made it substantially easier for workers and unions to establish joint employer status for franchisors, staffing company users and similar entities. However, a federal court challenge arose before the rule's effective date.

Specifically, in March 2024, Judge J. Campbell Barker of the U.S. District Court for the Eastern District of Texas vacated the 2023 rule as arbitrary, also striking the rescission of the 2020 rule and effectively leaving the 2020 standard as the operative regulation. The NLRB's February 25, 2026, action formally codifies that result, bypassing notice-and-comment requirements on the basis that the 2023 rule never took effect and the 2020 rule has remained operative.

Core Test for Joint Employer Status

Under the reinstated 2020 rule, an entity is a joint employer only if two conditions are met:

1. The two employers share or co-determine employees' essential terms and conditions of employment.
2. The putative joint employer possesses and exercises substantial direct and immediate control over one or more of those essential terms and conditions in a way that meaningfully affects the employment relationship.

The burden of proof lies with the party asserting joint employer status, and the determination is based on the totality of relevant facts in each setting.

Essential Terms and Conditions of Employment

The rule limits "essential terms and conditions of employment" to eight enumerated categories: 1) wages, 2) benefits, 3) hours of work, 4) hiring, 5) discharge, 6) discipline, 7) supervision and 8) direction. Joint employer status turns on substantial direct and immediate control in at least one of these areas.

Practical Guidance

The rule provides concrete guidance clarifying what does and does not constitute direct and immediate control for each essential term. For example, directly determining wage rates constitutes control, but entering into a cost-plus contract does not. Similarly, deciding which individuals to hire or terminate reflects direct control, whereas merely requesting staffing levels, setting baseline qualifications or reporting misconduct does not.

The same logic applies to supervision and direction: Telling employees how to perform their work or assigning specific schedules constitutes control, but setting project deadlines or operating hours or providing limited, routine instructions does not.

Treatment of Indirect and Reserved Control

The rule affirms that actual practice, not theoretical authority, governs the analysis. "Substantial" control must have a regular or continuous consequential effect; sporadic or de minimis control is insufficient. Indirect control and contractually reserved but unexercised authority may be considered, but only to supplement and reinforce evidence of actual direct and immediate control. They cannot independently establish joint employer status.

Practical Implications for Employers

For employers utilizing contractors, franchisees, staffing agencies or other third-party labor providers, the reinstated 2020 rule reduces the risk that the NLRB will find joint employer status based solely on indirect control, contractual but unused authority or general expectations in commercial agreements.

The reinstated rule rewards structures where the direct employer retains authority over day-to-day employment decisions and the contracting entity limits its role to setting business objectives and performance standards.

Notwithstanding the narrower standard, businesses should review their contracts and on-the-ground practices to ensure that operational conduct does not cross into the kind of substantial, direct and immediate control that would support a joint employer finding. The rule's emphasis on actual practice over contractual labels means that even well-drafted agreements cannot insulate an entity where day-to-day conduct reflects the exercise of direct control.

Employers should also be aware that the Service Employees International Union is challenging the 2020 rule in the U.S. Court of Appeals for the District of Columbia Circuit, and a successful challenge could once again alter the governing standard.

For questions about the NLRB's reinstated 2020 joint employer standard or how it may affect your staffing, franchise or subcontracting arrangements, please contact the authors or your Holland & Knight relationship attorney.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.