National Labor Relations Board restores the 2020 joint employer rule after a court vacated the 2023 standard
In short
- What changed
- The National Labor Relations Board (NLRB) put its 2020 joint employer rule back into the regulations. The 2023 rule that replaced it was struck down by a court before it ever took effect, so the standard employers were actually subject to does not change.
- Who's affected
- Private employers whose work is done by another company's employees, through staffing agencies, contractors or franchising, and the companies that employ those workers.
- What to do
- Nothing is required. If you rely on another company's workers, it is worth reviewing where you set or control their wages, hours, hiring, discipline or supervision.
What changed
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From the sourceSupplementary Information
the Board hereby revises 29 CFR subpart D to replace the text of the vacated 2023 Rule with the text of the 2020 Rule, which remains in effect.
The NLRB revised its joint employer rule in the Code of Federal Regulations (CFR), at 29 CFR 103.40, replacing the text of the vacated 2023 rule with the text of the 2020 rule.
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From the sourceSupplementary Information
As the 2023 Rule has never taken effect, the prior rule titled “Joint Employer Status Under the National Labor Relations Act,” which was promulgated on February 26, 2020 (2020 Rule), remains the operative rule for determining joint employer status.
The 2023 rule never took effect. The 2020 rule remained the operative standard for joint employer status after the court's vacatur.
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From the source29 CFR 103.40(a)
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.
Under the restored standard, an employer is a joint employer of another employer's employees only if the two share or codetermine the employees' essential terms and conditions of employment, which requires substantial direct and immediate control over one or more of them.
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From the source29 CFR 103.40(b)
Essential terms and conditions of employment means wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.
The essential terms and conditions are wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction.
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From the source29 CFR 103.40(a)
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.
Indirect control, and authority reserved in a contract but never exercised, count only to the extent they supplement and reinforce evidence of direct and immediate control. The party asserting joint employer status has the burden of proof.
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From the sourceProcedural and Other Matters
Our action is ministerial and therefore will have no separate economic effect.
The Board issued the rule without notice and comment, calling the action ministerial because it implements the court's order, and stated it will have no separate economic effect.
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From the sourceFootnote 1
he does not believe that the 2020 Rule sets forth the proper standard for determining when an entity is a joint employer.
Board Member Prouty joined the action because of the court's order but stated that he does not believe the 2020 rule sets the proper standard.
Who is affected
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From the source29 CFR 103.40(a)
An employer, as defined by section 2(2) of the National Labor Relations Act (the Act), may be considered a joint employer of a separate employer's employees
The rule governs when one employer is treated as a joint employer of another employer's employees under the National Labor Relations Act.
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AmendSignal analysis29 CFR 103.40(c)(1)
An entity does not exercise direct and immediate control over wages by entering into a cost-plus contract (with or without a maximum reimbursable wage rate).
It matters most to private employers whose work is done by another company's employees, such as users of staffing agencies, contractors and subcontractors, and franchisors, and to the companies that employ those workers.
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AmendSignal analysis29 CFR 103.40(a)
An employer, as defined by section 2(2) of the National Labor Relations Act (the Act), may be considered a joint employer of a separate employer's employees
Public employers are generally outside this rule. The National Labor Relations Act's definition of employer, which the rule relies on, excludes states and their political subdivisions, so public school districts and state and local government agencies are not covered by it.
What it means in practice
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AmendSignal analysisSupplementary Information
As the 2023 Rule has never taken effect, the prior rule ... remains the operative rule for determining joint employer status.
Because the 2023 rule never took effect, the standard employers were actually subject to does not change. The practical effect is that the published regulation now matches the standard already in force.
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AmendSignal analysis29 CFR 103.40(f)
the authority that an entity reserves to itself, under the terms of a contract with another employer, over the essential terms and conditions of employment of that other employer's employees, but that has never been exercised.
The restored standard turns on control an employer actually exercises. Contract terms that reserve authority over another employer's workers, without that authority being used, are not enough on their own.
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AmendSignal analysisTitle and 29 CFR 103.40(a)
Withdrawal of 2023 Standard for Determining Joint Employer Status
This rule addresses joint employer status under the National Labor Relations Act only. It does not by itself change how joint employment is assessed under other laws, such as federal wage and hour law.
What to do
Required
The rule does not create new requirements for employers. It restores regulatory text that was already the operative rule.
Worth considering
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AmendSignal suggestion29 CFR 103.40(b)-(d)
Substantial direct and immediate control means direct and immediate control that has a regular or continuous consequential effect on an essential term or condition of employment of another employer's employees.
If your organization relies on staffing, contracting or franchise arrangements, consider reviewing where it actually sets or controls any of the eight essential terms (wages, benefits, hours, hiring, discharge, discipline, supervision, direction) for another employer's workers, since that is what the restored standard looks at.
History
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The NLRB replaced the vacated 2023 text in 29 CFR 103.40 with the text of the 2020 rule, effective immediately and without notice and comment. Source (opens in a new tab)
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The U.S. District Court for the Eastern District of Texas vacated the 2023 rule in Chamber of Commerce v. NLRB, No. 6:23-CV-00553, before it took effect. The 2020 rule remained the operative rule. Source (opens in a new tab)
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The NLRB delayed the 2023 rule's effective date from December 26, 2023 to February 26, 2024, to facilitate resolution of legal challenges. Source (opens in a new tab)
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The NLRB published a 2023 rule to rescind and replace the 2020 rule, with an effective date of December 26, 2023. Source (opens in a new tab)
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The 2020 rule took effect. Source (opens in a new tab)
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The NLRB published its 2020 joint employer rule, codified at 29 CFR 103.40. Source (opens in a new tab)
Sources
- Withdrawal of 2023 Standard for Determining Joint Employer Status, 91 FR 9707 (February 27, 2026) (opens in a new tab)
- Standard for Determining Joint Employer Status; delay of effective date, 88 FR 81344 (November 22, 2023) (opens in a new tab)
- Standard for Determining Joint Employer Status, 88 FR 73946 (October 27, 2023) (opens in a new tab)
- Joint Employer Status Under the National Labor Relations Act, 85 FR 11184 (February 26, 2020) (opens in a new tab)