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EMPLOYER TAX BRIEF
The latest on the joint-employer rule
Along with hiring and retaining employees, many small and midsize employers partner with outside entities to fulfill labor needs.
However, when more than one organization exercises power over the same group of workers, the legal concept of “joint-employer status” may apply. In what’s been an ongoing saga, the National Labor Relations Board (NLRB) recently reestablished, yet again, how it will view such relationships.
Playing field
As mentioned, joint-employer status potentially arises when two separate entities share control over the working conditions of the same employees. For example, in addition to maintaining its own staff, a business may use workers supplied by a staffing agency. Or it might operate under a franchise agreement, whereby certain employment policies are influenced by another organization.
If the government considers the two entities joint employers, both may have responsibilities under federal labor law. These can include obligations related to union negotiations, as well as potential liability for certain workplace violations.
Why it matters
The NLRB is an independent federal agency created by Congress in 1935 to enforce the National Labor Relations Act. Its interpretation of the final rule has shifted multiple times over the past decade. In turn, those shifts have created uncertainty for employers trying to determine when a relationship might trigger joint-employer status and potential compliance concerns.
The joint-employer rule often makes the news in connection with large franchises or national corporations. But it can affect employers of all sizes. If your organization works with third-party vendors, staffing agencies or contractors, or if it operates under a franchise agreement, you may find yourself in a gray area about who legally controls hiring decisions, employee supervision or workplace policies.
In the broadest sense, the more influence one organization has over workers supplied by another, the greater the chance that federal regulators could view the arrangement as a joint-employment relationship. If that happens, an employer may be legally required to participate in union-related collective bargaining or even face liability for labor law violations involving workers technically employed by another organization.
New developments
The challenge is figuring out where the line is drawn, and the NLRB has officially revised the boundaries again. In early 2026, the NLRB announced a final rule that its joint-employer standard is now the one it issued in 2020 — not the rule it proposed in 2023.
What’s the difference? The 2020 final rule is generally considered narrower. Under it, an organization is likely to be considered a joint employer only if it exercises “substantial direct and immediate control” over key terms and conditions of employment. These typically include matters such as:
- Wages,
- Hiring,
- Discipline and termination,
- Scheduling, and
- Day-to-day supervision.
Because of legal challenges, the 2023 final rule never actually took effect and was vacated by a federal judge in 2024. However, it would have significantly broadened the definition of a joint employer, allowing an organization to be considered one even if it had only indirect control over workers or reserved the right to influence employment decisions. This wider perspective could have exposed many employers to greater liability in routine vendor or franchise relationships.
Relatively safer ground
By formally reinstating the 2020 rule, the NLRB has returned to a more limited interpretation of joint-employer status. So, for the time being, employers are on relatively safer ground. But don’t get too comfortable. More legal challenges could arise (if they haven’t already), and the final rule might shift again.
Out of an abundance of caution, consider working with your attorney to review contracts with staffing firms, contractors, franchise partners or others to ensure compliance. Meanwhile, we’d be happy to help you evaluate how arrangements with other entities are impacting your organization’s financial performance.