NLRB finalizes withdrawal of 2023 Joint Employer Rule and reinstates 2020 standard

On February 27, 2026, the National Labor Relations Board (NLRB or the Board) published a final rule formally withdrawing the 2023 standard for determining joint employer status under the National Labor Relations Act (the Act) and reinstating the prior 2020 rule. The Board's action follows a March 8, 2024, decision of the U.S. District Court for the Eastern District of Texas in Chamber of Commerce v. NLRB, No. 6:23-CV-00553, which vacated the 2023 Rule in its entirety.  Because the Board characterized this action as ministerial in nature—simply implementing the court's vacatur—the final rule took effect immediately upon publication without a prior notice-and-comment period.  

Background

On October 27, 2023, the Board published a final rule (the 2023 Rule) that rescinded and replaced the 2020 rule governing joint employer status under the Act. The 2023 Rule established a broader standard for determining whether two employers are joint employers of particular employees.  Shortly after its publication, on November 19, 2023, the U.S. Chamber of Commerce and other parties filed a legal challenge to the 2023 Rule in the U.S. District Court for the Eastern District of Texas.  On March 8, 2024, the court vacated the 2023 Rule. Because the 2023 Rule never took effect, the prior 2020 Rule has remained the operative standard for determining joint employer status since February 26, 2020.

In its February 27, 2026, final rule, the Board formally revised 29 C.F.R. Part 103, Subpart D to replace the text of the vacated 2023 Rule with the text of the 2020 Rule. The Board found good cause to make the rule effective immediately, rather than observing the typical 30-day waiting period. The Board also concluded that its action is not subject to the Congressional Review Act because it only implements the court's vacatur.

The 2020 joint employer standard now in effect

Under the reinstated 2020 Rule, an employer may be considered a joint employer of a separate employer's employees only if the two employers "share or codetermine the employees' essential terms and conditions of employment." To establish joint employer status, the alleged joint employer must possess and exercise "substantial direct and immediate control" over one or more essential terms or conditions of employment such that it "meaningfully affects matters relating to the employment relationship." The party asserting joint employer status bears the burden of proof, and the determination is made based on the totality of the relevant facts in each particular employment setting.

The 2020 Rule provides detailed definitions of what constitutes—and what does not constitute—direct and immediate control over each of the eight enumerated essential terms and conditions, including the following examples:

• Wages: An entity exercises direct and immediate control over wages if it actually determines wage rates, salary, or other rates of pay for another employer's individual employees or job classifications. Entering into a cost-plus contract, with or without a maximum reimbursable wage rate, does not constitute direct and immediate control.
• Benefits: An entity exercises direct and immediate control over benefits if it actually determines the fringe benefits provided to another employer's employees, including selecting benefit plans and benefit levels. Permitting another employer under an arm's-length contract to participate in its benefit plans does not constitute direct and immediate control.
• Hours of work: An entity exercises direct and immediate control if it actually determines work schedules or hours, including overtime, of another employer's employees. Establishing enterprise operating hours or specifying when services are needed does not constitute direct and immediate control.
• Hiring and discharge: An entity exercises direct and immediate control over hiring if it actually determines which particular employees will or will not be hired, and over discharge if it actually decides to terminate employment. Requesting changes in staffing levels, setting minimal hiring standards, or bringing misconduct to the attention of another employer that makes the actual decision does not constitute direct and immediate control.
• Supervision and direction: An entity exercises direct and immediate control over supervision by actually instructing employees how to perform their work or issuing performance appraisals, and over direction by assigning individual work schedules, positions, and tasks. Instructions that are limited and routine and consist primarily of telling employees what work to perform, or where and when to perform it, but not how to perform it, do not constitute direct and immediate control.

Key dates and effective date

The final rule was signed on February 25, 2026 and published in the Federal Register on February 27, 2026.  The rule is effective immediately upon publication.  

Practical implications for employers

The reinstatement of the 2020 Rule is welcome news for businesses that had opposed the broader 2023 standard. The 2020 Rule's requirement that an entity possess and exercise "substantial direct and immediate control" over essential terms and conditions of employment sets a higher threshold for joint employer status than the 2023 Rule would have imposed.  In particular, indirect control, contractually reserved authority that is never exercised, and control over non-essential mandatory subjects of bargaining may only supplement—not independently establish—a finding of joint employer status.