By: Samantha M. Safchinsky, Esquire
On Feb. 27, 2026, the National Labor Relations Board (“NLRB”) published a final rule[1] that reinstated its 2020 standard, which requires a higher threshold for determining joint-employer status.[2] The joint-employer concept can arise in employment relationships like temporary staffing agencies, third party vendor contracts, subcontracting, and franchises, where the line of who controls the employees’ work can be blurred. The reinstated final rule states that aa joint employer relationship exists only if two conditions are met: the employers share or co-determine employees’ essential terms and conditions of employment; and the putative joint employer “must possess and exercise substantial direct and immediate control” over at least one of those terms and conditions. A putative joint employer is defined as a secondary business or entity alleged to share responsibility for a group of workers, alongside their direct or primary employer.
The rule limits “essential terms and conditions of employment” to eight categories:
- The putative employer must determine the “wage rates, salary or other rate of pay that is paid to 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 exercising direct and immediate control.
- The putative employer must determine the fringe benefits to be provided or offered to another employer’s employees. The final rule states that this includes “selecting the benefit plans (such as health insurance plans and pension plans) and/or level of benefits provided to another employer’s employees.” An entity does not exercise direct and immediate control over benefits by permitting another employer, under an arm’s-length contract, to participate in its benefit plans.
- Hours of Work. The putative employer must determine work schedules or hours, including overtime, of another employer’s employees. Establishing the other entity’s operating hours does not constitute exercising direct and immediate control.
- The putative employer must determine which particular employees will be hired and which will not. Requesting changes in staffing levels to accomplish tasks does not rise to the level of exercising direct and immediate control.
- The putative employer must decide to terminate the employment of another employer’s employee. Things like bringing attention to another employer about an employee’s poor performance, expressing a negative opinion about another employer’s employee, or setting minimal standards of performance is not considered exercising direct and immediate control.
- The putative employer must decide to suspend or otherwise discipline another employee’s employee. Same as for discharge, things like bringing misconduct or poor performance to the attention of another employer that makes the actual disciplinary decision does not meet the standard.
- Supervision. The putative employer must instruct another employer’s employees how to perform their work or issue employee performance appraisals. If the supervision of another employer’s employees follows instructions that are essentially just saying the what, where, and when of the work required but not how to perform it, it does not meet the standard.
- The putative employer must assign particular employees their individual work schedules, positions, and tasks. The standard is not met if the employer only sets schedules for completion of a project or describes work to be accomplished on a project.
Background
The 2020 standard vacated the NLRB’s broader 2015 standard under Browning-Ferris Industries of California, Inc., 362 NLRB No. 186. The 2015 standard significantly broadened the scope of what is considered a joint employer. It included putative employers (1) who indirectly affect employees’ terms and conditions of employment or (2) who reserve the right to control but do not exercise that right, thereby placing many more employers under NLRB’s “joint employer” umbrella. 362 NLRB No. 186 (Aug. 27, 2015).
In 2023, the NLRB returned to the 2015 standard, but it never formally took effect. In March 2024, a Texas federal court judge struck down the rule, and the NLRB dropped its appeal shortly thereafter.
Conclusion
For employers who work with contractors or other third parties, this final rule reduces the likelihood of the NLRB finding they have joint employer status if they are asserting indirect control or have reserved the right to control in a contract but do not exercise such control over the employees. The final rule emphasizes employer conduct versus contract language.
If you are a business owner or executive in need of assistance with evaluating a business’ potential joint employer status PK Law’s Labor and Employment Attorneys can help. Contact us HERE or email information@pklaw.com.
Samantha Safchinsky is an Associate in PK Law’s Education, Labor and Employment Group. Samantha assists in all types of public and private sector labor and employment matters including employment discrimination and retaliation claims and defense representation in matters that have arisen as a result of the passage of the Maryland Child Victims Act of 2023. Samantha can be reached at 410-938-2645 or ssafchinsky@pklaw.com.
[1] 91 Fed. Reg. 9707, Withdrawal of 2023 Standard for Determining Joint Employer Status.
[2] The Board determined that its issuance of the final rule is “ministerial in nature” because the prior 2023 rule returning to the Browning-Ferris standard was vacated before it took effect.
