NLRB Reinstates 2020 Joint Employer Standard: A Return to Direct Control

On February 26, 2026, the National Labor Relations Board formally reinstated its 2020 joint-employer standard. This action officially withdraws a Biden-era 2023 rule and restores a narrower framework for determining when two businesses share legal responsibility for the same group of workers. By returning to the 2020 standard, the Board is aiming to settle period of legal uncertainty that has loomed over the business community for years.

Closing the Regulatory Gap

The Board’s action traces back to a legal defeat. In 2020, the Board adopted a rule setting out its joint-employment standard. Among other things, that standard found joint employment only when two businesses exercised direct and substantial control over the same worker. The Board retreated from that position in 2023, adopting a new rule that allowed joint employment based only on “indirect” or “reserved” control. But in March 2024, the U.S. District Court for the Eastern District of Texas struck down the 2023 rule. The court ruled that the 2023 rule was “arbitrary and capricious” because the word “employee” under the National Labor Relations Act is defined by the common law, and the 2023 rule’s expansive standard contradicted long-standing common-law standards.

That ruling created a technical “regulatory gap.” The Biden-era rule was vacated, but the official Code of Federal Regulations had not yet been updated to reflect the return of the previous standard. This left the Board without a formal, codified rule on the books. By formally codifying the 2020 standard, the NLRB has now officially closed that gap.

The Return of “Direct and Immediate Control”

The rule’s most immediate effect is to restore the “direct and immediate control” standard. Under this standard, a company is deemed a joint employer only if it exercises “substantial direct and immediate control” over the essential terms and conditions of another company’s employees. To meet this threshold, an entity must actually possess and exercise such control over one or more essential employment terms to a degree that it meaningfully affects the employment relationship.

This standard is a higher bar than the 2023 rule’s “reserved control” test. The standard focuses on concrete, actual control over functions such as hiring, firing, discipline, supervision, and wages. Critically, merely retaining the ability to influence these decisions, without actually doing so, generally does not create a joint-employer relationship. Similarly, indirect influence, brand standards, or general operational expectations are no longer enough to trigger shared bargaining obligations. For employers, the change allows them to rely more comfortably on the terms of their service contracts. They are less likely to be considered the employer of another company’s workers simply because they set basic standards for the project.

A Mirror of the Broader Political Shift

This move comes at a time of shifting employment standards. On the same day, the U.S. Department of Labor proposed a rule that adopts a more focused test for classifying workers under the FLSA. For the business community, both rules signal a shift from open standards to bright-line rules. They may also signal a period of greater stability.

Strategic Risk Management for the Business Community

The Board’s action may also help companies utilizing staffing agencies, subcontractors, or franchise models, allowing them to enforce brand standards and safety requirements. These companies will operate under a brighter-line standard, and so may find it easier to navigate joint-employment risks. 

That said, some risks remain. Joint-employer liability remains a fact-intensive inquiry. Businesses must ensure onsite managers do not cross the line from setting project goals to “directing the work” of third-party providers through direct supervision or task assignment. Under this results-oriented framework, the focus must remain on what needs to be done rather than how the vendor’s employees perform it. Furthermore, because the direct control rule makes it harder to pull parent companies into bargaining, businesses should anticipate a tactical pivot by unions toward aggressive, site-specific organizing or alternative pressure tactics, such as legislative lobbying and corporate campaigns, that bypass the NLRB’s doctrine entirely.

Looking Ahead: Growth and Flexibility

If nothing else, the Board’s action provides more certainty. That certainty could, in the long term, encourage growth in affected industries, such as the franchise and outsourced-services sectors. Businesses that paused expansion in response to the expected impact of the 2023 rule may now be more comfortable pursuing long-term partnerships. 

However, prudent employers will not view this as a permanent resolution. To protect their business, employers should audit service agreements and train onsite managers on the “direct control” boundary. While the NLRB has provided much-needed breathing room, maintaining operational flexibility remains essential in this unpredictable legal environment.