NLRB Reinstates 2020 Joint-Employer Rule, Issues Case Handling Focus

The National Labor Relations Board (NLRB) recently made some procedural moves that impact U.S. employers. This article summarizes these actions.

Joint-Employer Rule Swapped Out

The NLRB withdrew its 2023 “Standard for Determining Joint-Employer Status” (also known as the Joint-Employer Rule) and reinstated the 2020 version of the rule. The agency action, effective Feb. 27, creates a narrower, more employer-friendly standard and reduces the legal risk for:

• Companies that use contractors;
• Staffing agencies; and,
• Franchisors.

The 2023 rule, established during the Joe Biden presidential administration, sought to significantly expand joint-employment liability by including “indirect” or “reserved” control as key determinants of an employment relationship. That rule was vacated by a federal court in Texas in March 2024.

With the 2020 rule reinstated, employers should be aware that:

• Direct control is required. Joint-employer status only applies if a company directly affects employees’ “essential terms and conditions of employment” (i.e., wages, benefits, hours, hiring, discharge, discipline, supervision and direction).
• Indirect control is not sufficient. Indirect influence, contractually reserved but unused authority, or sporadic/de minimis control is insufficient to create a joint-employer relationship.
• “Substantial control” is a critical term. The rule defines “substantial control” in the employment relationship as having a “regular or continuous consequential effect” on a worker’s job.

Given the NLRB rule reinstatement, employers should review their contracts and daily operations to ensure they don’t accidentally exercise the direct control that triggers joint-employer liability.

Also, note that persistent legal challenges to the 2020 rule, including one by the Service Employees International Union (SEIU), could lead to additional NLRB guidance changes in the future.

Case Handling Guidance Issued

The NLRB and its general counsel released a memorandum that positioned how it will handle workplace cases in the near term. The document, in general, presented a more employer-friendly stance for the agency under the second Donald Trump presidential administration, versus what had been viewed as a more union-weighted stance during the Biden administration.

Key items from the memorandum include:

• Workplace policy scrutiny is reduced. General counsel Crystal Carey instructed regional offices to stop prosecuting cases based solely on the maintenance of potentially unlawful employee handbook rules, unless the rule is enforced or is “facially and patently unlawful.”
• A new evidence submission protocol is established. Parties filing unfair labor practice charges must now submit supporting evidence and a witness list within two weeks of filing or face potential dismissal of those charges.
• Settlement is encouraged and remedies are limited. Regional offices are directed to favor settlement over litigation and refrain from routinely seeking “enhanced remedies” (e.g., public notice readings, apology letters), except in egregious cases.
• The case backlog is the focus. To prioritize efficiency, the board aims to reduce the backlog by focusing on high-impact violations rather than technical infractions.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Compensation
• Organizational Performance
• Total Rewards