NLRB Withdraws 2023 Joint‑Employer Rule, Reinstates 2020 Standard Impacting McDonald's

The National Labor Relations Board published a final rule in the Federal Register at 91 Fed. Reg. 9707 on Feb. 27, 2026, withdrawing its 2023 “Standard for Determining Joint‑Employer Status” and formally readopting the 2020 standard to be codified at 29 C.F.R. § 103.40. The Board described the action as “ministerial” and made the repeal and replacement effective immediately, saying notice and public comment were unnecessary because the 2023 rule had been vacated by a federal court in March 2024.

Under the reinstated 2020 framework, an entity may be considered a joint employer only if it “possess[es] and exercise[s] ‘substantial direct and immediate control over one or more essential terms or conditions’ of employment,” language preserved in the Federal Register and cited by firm alerts. Sullcrom’s alert reproduces the list of essential terms as “wages, benefits, hours of work, hiring, discharge, discipline, supervision,” and states that the control must be “direct and immediate” with a “regular or continuous consequential effect” on those terms.

The rule formalizes a legal path that has been in force since the U.S. District Court for the Eastern District of Texas vacated the NLRB’s 2023 rule in March 2024. Holland & Knight identifies Judge J. Campbell Barker as the judge who vacated the 2023 regulation as arbitrary, and Ogletree notes the Board voluntarily dismissed its appeal after that decision. Proskauer and LaborRelationsUpdate emphasize that the 2026 codification reflects the standard the Board has already been applying since the vacatur.

Employer groups and law firms flag immediate practical consequences for staffing, subcontracting, and franchise models. Bipc and Proskauer say the tighter “direct and immediate” test raises the bar for finding joint‑employer status and provides more predictability for companies using staffing agencies, subcontractors, or franchise structures, a category that includes franchise systems such as McDonald’s. Bipc warns that a joint‑employer designation can still “carry heavy legal consequences,” including potential liability and collective bargaining obligations.

The NLRB justified bypassing notice and comment as a response to the court vacatur rather than a policy shift. Sullcrom reports the Board found “good cause” to make the repeal and replacement effective immediately and explicitly stated that the rulemaking merely implemented the court order, a rationale echoed in Holland & Knight and Ogletree advisories.

Legal uncertainty remains despite the formal codification. Bipc notes a pending challenge by the Service Employees International Union described in its alert as lodged in the “US District Court for the District of Columbia Circuit,” and multiple firms caution that future litigation or a differently composed Board could again change the joint‑employer test. For now, the Federal Register entry at 91 Fed. Reg. 9707 and the readoption of the 2020 standard at 29 C.F.R. § 103.40 lock in a narrower control test that franchise operators, franchisors, staffing firms, and their lawyers will use to reassess contracts, supervision practices, and bargaining risk.