What Employers Need to Know About the NLRB’s Joint Employer Rule

What the NLRB Joint Employer Rule Means for Employers

A joint employer classification can significantly impact how a business operates, especially when working with contractors, staffing agencies, or franchisees. Employers need to understand what triggers joint employer status and the legal responsibilities that come with it to avoid unexpected bargaining obligations or liability for another company’s labor violations. Employers that misunderstand their level of control over another company’s workers risk unintended legal and financial consequences.

When Businesses Are Considered Joint Employers

A business qualifies as a joint employer if it directly and immediately controls at least one key employment term, such as wages, scheduling, hiring, or supervision.
Indirect control, recommendations, or general oversight do not establish joint employer status under the current rule.
The NLRB reviews contract terms, day-to-day interactions, and management decisions to determine whether a company exercises actual control over another employer’s workforce.

Legal and Financial Implications

Liability for Unfair Labor Practices: A company that qualifies as a joint employer can be held responsible for labor violations committed by the other employer.
Collective Bargaining Obligations: A joint employer may be required to negotiate with unions over wages, benefits, scheduling, and other workplace policies.
Involvement in Strikes and Labor Disputes: A joint employer may face picketing, strikes, or other forms of protest, even if the primary employer is the main target of the dispute.

Employers that set workplace policies or influence working conditions for another company’s employees should evaluate whether their level of control meets the current joint employer threshold.

Are You a Joint Employer?

The Joint Employer Rule defines when two businesses share responsibility for the same employees under the National Labor Relations Act (NLRA). If a company meets the criteria for joint employment, it may be legally required to bargain with unions, held responsible for labor law violations, and included in disputes involving another business’s workforce.

How the NLRB Determines Joint Employment

Control Over Working Conditions: A company may be classified as a joint employer if it sets wages, schedules, hiring policies, supervision methods, or workplace rules for another company’s employees.
Direct vs. Indirect Control: Under the current rule, established in 2020, the Joint Employer Rule only applies when a business directly and immediately controls at least one of the aforementioned terms.
Business Relationships That May Be Affected: Employers that use staffing agencies, subcontractors, or franchise models need to evaluate their level of control over contracted workers to avoid unnecessary risk.

Compliance Strategies for Employers

Employers that work with contractors, franchisees, or staffing agencies should evaluate whether they can avoid joint employer status altogether. Businesses that do not need to control another company’s workforce should take deliberate steps to eliminate any oversight that could create legal liability. However, some industries—such as franchising, construction, and staffing—may require a level of coordination that makes joint employer status unavoidable. In these cases, businesses should take steps to reduce liability and clearly define responsibilities.

How to Avoid Joint Employer Status

Employers that want to remove any risk of joint employer classification should examine how they interact with another company’s workers and what authority they retain in contracts.

Structure Contracts to Keep Employment Responsibilities Separate
- Contracts should avoid language that gives one company control over another company’s workforce. If an agreement allows one business to set another company’s pay rates, schedules, or workplace policies, it increases the likelihood of joint employer classification.
- Instead of specifying how workers should be managed, agreements should focus on the expected results of the business relationship. For example, a staffing contract should define the number of workers needed and the expected job duties, without stating how those workers should be scheduled or supervised.

Keep Supervision and Decision-Making Separate
- Supervisors and managers should not give direct instructions, discipline workers, or intervene in daily operations of another company’s employees.
- Businesses that use staffing agencies should route all work-related communications through the staffing firm’s management. If an issue arises, the business should report it to the staffing agency rather than addressing the worker directly.
- Franchisors should avoid setting detailed employment policies that control hiring, firing, or discipline at franchise locations.

Remove Reserved Control That Is Not Necessary
- Even if a company never exercises control over employment decisions, a contract that gives it the right to do so can still lead to joint employer classification.
- Businesses should eliminate clauses that require contractors, staffing agencies, or franchisees to get approval before making hiring, firing, or wage decisions.

Industry-Specific Risks

Some industries face a greater risk of joint employer classification because of the way work is structured, how responsibilities are divided, and the level of coordination required between companies. Businesses that rely on franchise agreements, staffing firms, or subcontractors frequently need to align certain workplace policies across multiple entities, which can create legal exposure if those policies give one company control over another company’s workforce.

A business is more likely to be classified as a joint employer when:

It controls workplace policies that affect wages, schedules, or discipline for workers employed by another company.
It directly supervises or assigns work to a contractor’s or staffing agency’s employees.
It sets employment conditions for another business through contract requirements or operational mandates.

The industries below have a higher likelihood of joint employer scrutiny based on these factors.

Franchises

Franchisors face joint employer risk when they control hiring, discipline, scheduling, or pay structures for franchisees’ employees.
Requiring franchisees to follow strict HR policies, use centralized payroll systems, or obtain approval before terminating employees increases the likelihood of joint employer classification.
The risk is lower when franchisors focus on brand standards, operational guidance, and product quality without dictating employment terms.

Staffing and Temp Agencies

Businesses that directly manage staffing agency workers by setting their hours, work assignments, or job duties may be considered joint employers.
If a company has the authority to approve or reject a staffing firm’s hiring and firing decisions, the NLRB may determine that the business shares control over employment terms.
To reduce risk, businesses should work through the staffing agency for all employment decisions and avoid direct supervision of temporary workers.

Construction and Contracting

General contractors that set work hours, supervise subcontractor employees, or handle discipline increase the likelihood of being classified as joint employers.
If a general contractor requires subcontractors to follow specific hiring or wage policies, joint employer status becomes more likely.
Businesses that limit their role to project deadlines, safety requirements, and quality control have a lower risk of being classified as joint employers.

Retail and Hospitality

Companies that outsource security, janitorial, or food service operations could be classified as joint employers if they set schedules, manage discipline, or enforce workplace rules for the contractor’s employees.
Businesses that require contractors to use their employee handbook, pay structures, or performance evaluation processes increase the risk of joint employer status.
To avoid unnecessary liability, businesses should work with vendors that set their own employment policies and keep employment decisions separate.

Why Businesses Should Assess Their Risk Level

Employers in these industries should review their contracts, management policies, and daily interactions with outside workers. If a business is setting employment conditions for another company’s workforce, it may be at risk for joint employer status. Adjusting agreements and operational practices can help businesses avoid unnecessary liability under the current NLRB rule.

Enforcement Trends and Future Outlook

The NLRB’s joint employer rule has been the subject of legal challenges, regulatory changes, and shifting interpretations over the years. Businesses that rely on staffing agencies, contractors, or franchise relationships should prepare for potential changes as new cases, political shifts, and Board decisions continue to shape the standard.

What’s Likely to Change

The 2020 rule remains in effect after a federal court vacated the 2023 rule, but future changes are possible. A new presidential administration could shift the Board’s majority, which would likely lead to another attempt to broaden the standard to include indirect or unexercised control. The NLRB may also decide joint employer cases individually and create precedents that expand joint employer liability, even without a formal rule change.

Ongoing Legal Challenges

The NLRB’s Joint Employer Rule has faced repeated legal challenges, particularly when the Board has attempted to expand the standard. Employers, trade associations, and business coalitions have consistently challenged expansions of the joint employer standard in court, arguing that they create regulatory uncertainty and increased liability for businesses that rely on contractors, staffing firms, and franchise relationships. Given the legal battles surrounding past NLRB rule changes, this pattern of litigation is likely to continue as future Boards attempt to modify the standard.

Legal challenges have shaped the rule as much as NLRB policy changes. Federal courts have blocked or overturned expanded joint employer standards, including the 2023 rule, which was vacated by a federal court in 2024. The ruling found that the NLRB exceeded its authority by allowing indirect and unexercised control to trigger joint employer liability.
Business groups have consistently argued that a broader rule would disrupt standard business models.Organizations representing franchise brands, construction contractors, and staffing agencies have challenged expanded joint employer interpretations, arguing that they discourage outsourcing, limit business flexibility, and increase litigation risks.
If the NLRB attempts another rule change or expands joint employer liability through case decisions, more legal challenges are likely. Employers should expect ongoing litigation and appeals as business groups continue to fight against broader interpretations that increase legal risks for companies using third-party labor.
State-level laws and regulations could also impact joint employer status. Though the NLRB sets the standard under the NLRA, state labor laws and court decisions may create additional risks for employers in certain industries or locations.

Why Employers Should Monitor Legal Developments

The NLRB’s Joint employer rule is unlikely to remain static, given the history of Board reversals, court rulings, and political shifts affecting its enforcement. Employers should track:

Federal court rulings that challenge or uphold NLRB decisions.
State-level joint employer laws that could impose additional requirements.
NLRB case decisions that could set new precedents even without a formal rule change.

Businesses that stay informed about legal developments can adjust their contracts and management practices ahead of time, which reduces the risk of costly legal disputes. Reacting proactively to changes in joint employer standards helps businesses avoid compliance issues and unexpected liabilities.

Final Thoughts: Preparing for Future Changes

The NLRB’s Joint Employer Rule continues to evolve, and businesses that rely on contractors, franchisees, or staffing agencies should take steps to limit unnecessary risk. Even with the 2020 rule in place, legal challenges and potential Board changes could shift the standard again.

Employers that interact with another company’s workforce should review their contracts and management practices to determine whether they are exposed to joint employer liability. Proactive adjustments can help prevent disputes, reduce legal risks, and protect business operations.

Conn Maciel Carey’s national Labor & Employment Practice Group provides guidance on structuring contracts, adjusting workplace policies, and staying compliant with shifting regulations. Contact our team today at (202) 715-6244 or by email to discuss how your business can stay compliant and reduce exposure under the joint employer rule.

This article is for informational purposes only and does not constitute legal advice. While we strive to ensure accuracy, laws and regulations may change, and unintended errors may occur. This content may not address every aspect of the relevant legal requirements. For guidance on your specific situation, consult your attorney.