On February 26, 2026, the National Labor Relations Board (NLRB) issued its Final Rule for determining joint-employer status under the National Labor Relations Act. Effective as of February 27, 2026, the final rule rescinds the NLRB’s 2023 rule and formally reinstates the employer-friendly 2020 standard. Under this standard, a company will be deemed a joint employer only if it exercises “substantial direct and immediate control” over essential terms and conditions of an individual’s employment. Read on for a brief compendium on the protracted history of the NLRB’s joint-employer standards and highlights of the current standard.
Background and History
2015 Broad Standard:The NLRB issued its Browning-Ferris Industries decision, holding that:
- “Possessing the authority to control is sufficient to establish status as a joint employer regardless of whether control is exercised.”
- Such control “may be very attenuated” or indirect.
2020 Rule (Narrow Standard): The NLRB issued a rule replacing the 2015 standard with a narrower framework, under which:
- Employers could be deemed a joint employer only if they “share or codetermine the employees’ essential terms and conditions of employment.”
- An employer must actually exercise “substantial control” over the essential terms and conditions of employment.
Discussed further below, the rule provided key clarifications on the standard, including definitions of “essential terms and conditions of employment,” “substantial control,” and the application of “direct and immediate control” to the “essential terms and conditions of employment.”
2023 Rule (Return to Broad Standard): The NLRB issued a rule rescinding the 2020 standard and returning to a higher threshold, under which employers could be considered joint employers if they:
- Share an employment relationship with the employees under common-law agency principles; and
- Share or codetermine the employees’ “essential terms and conditions of employment.”
The latter inquiry reintroduced the concepts of “reserved” and “indirect” control, focusing on whether the employers had the authority to directly and/or indirectly control the employees’ essential terms and conditions of employment, regardless of whether it ever actually exercised that control.
2023 Rule Vacated: Before the effective date, a federal district court vacated the rule finding that it failed to establish a clear standard for employers, and that the rescission of the 2020 rule was “arbitrary and capricious.” The decision left the 2020 rule functionally effective although it was never formally reinstated.
Final Rule: 2020 Narrow Standard Reinstated
On February 26, the NLRB issued its Final Rule, which formally withdrew the 2023 rule and codified the 2020 standard. Like the 2023 standard, the current standard focuses on whether employers “share or codetermine the employees’ essential terms and conditions of employment.” However, it departs from the consideration of “reserved” and “indirect” control, instead requiring that an entity exercise “direct and immediate control” over the “essential terms and conditions of employment,” such that it “meaningfully affects matters relating to the employment relationship[.]”
Under the current standard, an entity may exercise “substantial direct and immediate control” over essential terms and conditions if it does the following with respect to another employer’s employees:
- Determines wages or salary;
- Determines fringe benefits to be provided or offered;
- Determines whether or not to hire particular employees;
- Decides to terminate an employee;
- Decides to suspend or discipline an employee;
- Instructs an employee on how to perform work or issues performance appraisals; or
- Assigns work schedules, positions, or tasks.
Key points of clarification include the following:
- “Substantial direct and immediate control” must have a “regular or continuous consequential effect” on the employee’s terms and conditions of employment.
- Control is not “substantial” if it is exercised on a “sporadic, isolated, or de minimis basis.”
- “Indirect control” does not include control or influence over “setting the objectives, basic ground rules, or expectations for another entity’s performance under a contract.”
- “Indirect control” and “reserved but never exercised authority” is “probative of joint-employer status, but only to the extent it supplements and reinforces evidence of the entity’s possession or exercise of direct and immediate control over a particular essential term and condition of employment.”
The Final Rule was issued without a notice-and-comment period, which the NLRB determined was unnecessary since the 2023 rule was vacated before it took effect.
Employer Takeaways
The Final Rule provides long-awaited clarity and predictability to employers after years of uncertainty. While the current standard makes it less likely for employers to be deemed joint employers, liability remains a fact-intensive inquiry determined by the totality of the circumstances. Accordingly, employers should consider the following:
- Evaluate business arrangements to ensure control is indirect and limited (e.g., staffing agencies, franchisees, contractors/vendors);
- Review service agreements for unnecessary “direct control” provisions;
- Ensure that day-to-day operational practices align with “direct control” limitations; and
- Train on-site managers on “direct control” limitations.
If you have any questions related to the current standard or its impact on your organization, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100 or 619.292.0515.