Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: NLRB formally withdraws 2023 standard for determining joint employer status, (Mar 11, 2026)

By Brandi O. Brown, J.D.

The NLRB’s joint employer standard guides courts in determining whether the employee of a franchised business may also be considered the employee of the businesses’ franchisor.

The NLRB has announced a final rule-withdrawing the 2023 standard for determining-joint employer-status and replacing it with the previous version of its rules, which were in effect prior to that standard. “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.”

On October 27, 2023, the NLRB-published a final rule-(2023 Rule) that rescinded and replaced a prior rule regarding the standard for determining-joint employer-status under the National Labor Relations Act. Then, on March 8, 2024, the U.S. District Court for the Eastern District of Texas issued an-order vacating that rule, both insofar as it rescinded the then-current version of 29 C.F.R. § 103.40 (2020 Rule), and insofar as it promulgated a new version of that regulation. The district court concluded, among other things, that the Board failed to reasonably address the disruptive impact of the new rule on various industries.

Making it official.-Now, the Board is revising its rules and regulations to replace the vacated text with the previous version of its rules. It explains: “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. 85 FR 11184 (Feb. 26, 2020), codified at 29 CFR 103.40.”

Therefore, in the final rule, the Board has formally revised 29 CFR subpart D to replace the text of the vacated 2023 Rule with the text of the 2020 Rule.

Differences. As explained by the NLRB-in 2023, when the new rule was adopted, the primary differences between the 2023 and 2020 rules were that “the 2023 rule more faithfully grounds the-joint-employer-standard in established common-law agency principles. In particular, the 2023 rule considers the alleged-joint employers’ authority to control essential terms and conditions of employment, whether or not such control is exercised, and without regard to whether any such exercise of control is direct or indirect. The common law clearly recognizes that reserved control and indirect control are relevant to the analysis.”

“By contrast,” the NLRB explained at that time, “the 2020 rule made it easier for actual-joint employers-to avoid a finding of-joint-employer-status because it set a higher threshold of “substantial direct and immediate control” over essential terms of conditions of employment, which has no foundation in common law.”

News: FranchisingDistribution