NLRB Reinstates Narrow Joint‑Employer Test, Easing Liability for Retailers and Contractors

The National Labor Relations Board has formally rescinded its broader 2023 joint‑employer rule and reinstated the February 2020 standard that requires proof of "substantial direct and immediate control over one or more essential terms or conditions" of employment, according to client alerts from Sullcrom, Ogletree and Duanemorris. Multiple advisories report the Board issued the final rule in late February 2026 (reported Feb 25–26, 2026), and Ogletree said the rule was set for Federal Register publication on February 27, 2026; Duanemorris and an original report stated the final rule is effective immediately.

The reinstated framework returns to a defined eight‑factor list of essential terms and conditions: wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction, Sullcrom and Ogletree said. Duanemorris summarized the reinstated standard as requiring that employers "share or codetermine the employees' essential terms and conditions of employment" and that a putative joint employer exercise control that "meaningfully affects matters relating to the employment relationship."

The rule reverses a brief regulatory arc that began with the Browning‑Ferris expansion in 2015, which permitted joint‑employer findings based on indirect control. The Board promulgated a narrower rule on February 26, 2020, replacing Browning‑Ferris, then proposed a broader "authority to control" test in 2022 and published that approach as the 2023 rule in October 2023. A federal district court in the Eastern District of Texas vacated the 2023 rule in March 2024, finding it was "unlawfully broad" and "arbitrary and capricious," Ogletree noted; the 2026 action restores the 2020 text to the NLRB's regulations.

Administratively, Ogletree reported that the Board issued the final rule "without a period of notice and comment," and Holland & Knight said the NLRB characterized the action as purely "ministerial," explaining it merely conformed regulations to the court's vacatur rather than reflecting a discretionary policy choice. Holland & Knight further reported the NLRB readopted the 2020 standard into the Code of Federal Regulations at 29 C.F.R. § 103.40.

Advisories from Ogletree, Littler and others framed the reinstatement as a business relief measure for multiemployer arrangements. Ogletree's "Key Takeaways" said the formal return to the 2020 rule "is a welcome sign for employers" and that the rule "provides greater clarity and predictability for employers, particularly those operating in franchise, staffing, subcontracting, or other arrangements involving multiple entities." Littler said the Board is "aiming to settle period of legal uncertainty that has loomed over the business community for years."

Employment lawyers urged companies to act quickly. Duanemorris advised, "We strongly encourage employers to carefully review existing independent contractor and employee classifications, as well as decisions regarding classification of newly engaged workers, with the assistance of counsel." Advisories also noted that while summaries and quotes describe detailed guidance on what constitutes "direct and immediate control" for each factor, the excerpts provided do not include the full Federal Register text or the Board's voting record; Ogletree flagged the FR publication date of February 27, 2026 as the place to find the full regulatory language and preamble.

For retailers, contractors and franchise operators that routinely rely on staffing or subcontracting, the reinstated 2020 test narrows the circumstances in which a second entity can be found a joint employer unless it exercises substantial, direct and immediate control over one of the eight listed employment terms.