The National Labor Relations Board (“NLRB” or “the Board”) recently announced the readoption of the narrower 2020 joint employer rule (29 C.F.R. § 103.40) for determining joint employer status. Returning to the stricter standard reduces potential exposure, particularly for employers that contract with staffing agencies, vendors, and franchisees.
Under the National Labor Relations Act (“NLRA” or “the Act”), a company that is deemed a “joint employer” shares responsibility for bargaining obligations and labor law compliance. The designation carries significant weight as it can expose employers to additional administrative burdens. Liability risk can increase even where a company’s involvement in the underlying employment relationship is limited.
The Board’s action effectively restores the pre-2023 regulatory framework following several years of rapid shifts in the joint employer standard, providing employers with greater clarity, at least for the time being, when structuring staffing, vendor, and franchise relationships.
The Withdrawn 2023 Rule
In October 2023, the NLRB issued a rule broadening the scope for determining joint employer status. Under this expansion, employers could be considered joint based on either direct or indirect control over essential terms or conditions of employment, including wages, benefits, hours, hiring, discharge, discipline, supervision, and direction. The rule expanded the circumstances under which additional entities could be held liable for...
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