NLRB withdraws 2023 joint-employer rule, reinstates 2020 standard for franchise restaurants

The National Labor Relations Board on February 26, 2026 issued a final rule withdrawing the October 2023 joint-employer regulation and reinstating the NLRB’s February 2020 joint-employer standard, with the agency setting the text for Federal Register publication on February 27, 2026 and making the change effective immediately. The reinstated test requires that a putative joint employer possess and exercise “substantial direct and immediate control” over essential terms and conditions of employment before joint-employer liability attaches.

Under the restored 2020 framework, the NLRB narrowed the list of essential terms and conditions to eight items: wages, benefits, hours of work, hiring, discharge, discipline, supervision, and direction. The Board clarified that indirect or reserved authority is not sufficient on its own, and that indirect control may be probative only to the extent it supplements evidence of direct and immediate control. The NLRB said, “Joint-employer status must be determined on the totality of the relevant facts in each particular employment setting,” and added, “The party asserting that an entity is a joint employer has the burden of proof.”

The rollback follows litigation that vacated the 2023 rule. In March 2024, a U.S. District Court for the Eastern District of Texas struck down the 2023 regulation, calling it “arbitrary and capricious” and “contrary to law” after concluding the 2023 standard conflicted with the common-law definition of “employee.” Business groups brought the challenge that led to the vacatur, and the NLRB subsequently voluntarily dismissed its appeal before issuing the February 26 final rule formally replacing the 2023 text with the 2020 text in accordance with the court proceedings in Chamber of Commerce v. NLRB.

The 2023 rule, published by the Board in late 2023, had adopted a broader, Biden-era approach that would have allowed joint-employer findings based on indirect or reserved control. The 2023 framework, critics warned, would have made it easier for companies to be deemed joint employers and could have exposed franchisors and service providers to greater collective bargaining obligations, union picketing and NLRA liability. Sources differ on the 2023 publication month and date; one advisory lists October 27, 2023 as the publication date while other summaries refer to November 2023.

Franchise restaurants and other industries with multi-party employment structures are the most directly affected by the rollback. The NLRB and legal analysts pointed to franchise systems, temporary staffing arrangements, construction subcontracting and gig-economy platforms as settings where the narrower 2020 standard will reduce the likelihood that brand owners or clients are deemed joint employers solely because they set brand standards or contractual requirements. Analysts also noted employers can more confidently rely on service contracts and operational separations under the reinstated rule.

On the Board’s procedural approach, the NLRB characterized the replacement as ministerial, saying, “Our action is ministerial and therefore will have no separate economic effect,” and found good cause to forgo notice-and-comment rulemaking because the 2023 rule never took effect after the court vacatur. The February 26, 2026 final rule therefore restores the “substantial direct and immediate control” standard that will govern joint-employer disputes in franchise, staffing, subcontracting and gig-economy cases unless further litigation or new rulemaking changes the regulatory landscape.