The National Labor Relations Board (NLRB) officially reinstated the 2020 pre-Biden joint employer standard, making joint employer status less likely to be found. The final rule, effective February 27, 2026, rescinds the Biden 2023 Rule, resolving uncertainties that have lingered since the U.S. District Court for the Eastern District of Texas issued an order vacating the 2023 Rule in March 2024.
What was the 2020 standard?
In February 2020, the NLRB issued its final rule on determining joint employer status. Under this rule, two entities were considered joint employers of an employee only if the two exercised “substantial direct and immediate control” over the employee’s “essential terms and conditions of employment,” defined as “wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.”
What was the 2023 standard?
Later in 2023, under the Biden administration, a new standard was implemented that made it easier to establish joint employer status. Under this new rule, an entity would be considered a joint employer if it had “indirect” or “reserved” control over another employer’s workers. As a result, an entity could be found to be a joint employer even if it did not actually exercise any control, a far lower standard than the “direct and immediate control” requirement under the 2020 Rule.
In March 2024, however, the U.S. District Court of the Eastern District of Texas struck down the 2023 Rule. The Rule was vacated on the grounds that the 2023 regulations went beyond the common-law definition of employment; the revocation of the 2020 Rule was arbitrary and capricious; and the 2023 Rule was unlawfully broad.
Although the 2023 Rule had been vacated the Code of Federal Regulations (where federal rules such as this are all published) had not been updated. As a result, there was no official rule on determining joint employer status. The NLRB has now officially reinstated the 2020 Rule into the Code of Federal Regulations.
What now?
Now, as in 2020, a company must have “direct and immediate control” over one or more of the essential terms and conditions of employment of another entity’s employees to be considered a joint employer. Unlike the 2023 Rule, this power must be exercised in a meaningful way.
Businesses hoping to avoid joint employer status may be relieved but should note that liability is fact dependent. To avoid this liability, it is important that such businesses do not overstep their bounds. While many cases involving temporary staffing companies continue to tread over the joint employer line, many other cases will remain safe. If this is a big issue in your business model, seek counsel to ensure you remain on the right side of the line.
The NLRB is expected to continue whittling away at Biden era regulations as President Trump’s term progresses. Employers should keep an eye out for such changes. But, if the Democrats retake the White House, prepare for the pendulum to swing back in the Biden direction.
Brody and Associates regularly advises management on compliance with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
