2020 Joint Employer Rule Remains in Effect After National Labor Relations Board Withdraws Appeal of Vacated 2023 Rule

After its recent final rule on the Standard for Determining Join Employer Status was vacated by a federal court decision, the National Labor Relations Board withdrew its appeal of the court’s decision on July 19, 2024.

The NLRB’s 2020 rule will remain in effect following the decision by the U.S. District Court for the Eastern District of Texas to vacate the agency’s most recent effort. This rule establishes the standard for when two entities constitute joint employers for purposes of collective bargaining obligations and claims of unfair labor practices under the National Labor Relations Act.

The current rule provides that joint employer status exists only where both employers actually exercise substantial direct and immediate control over one or more of the essential terms and conditions of employment for an employee. Those terms and conditions include:

• Wages
• Benefits
• Hours of work
• Hiring
• Discharge
• Discipline
• Supervision
• Direction

What Does This Mean for Businesses?

Most businesses in the private sector are subject to the NLRB’s joint employer rule, but the vacating of the recent final rule and subsequent withdrawal of the agency’s appeal is being seen by some industry sectors as a win, given the narrower definition of joint employment under the NLRA found in the current rule. The International Franchise Association expressed this as a “landmark victory” in a statement following the decision. Other impacted sectors include businesses using staffing agencies or contractors, as well as Professional Employer Organizations and their clients.

In withdrawing its appeal, the NLRB said it wants to take some time to address legal issues raised during litigation. The agency could decide at that point to reissue the rule, revise the rule, or abandon the rule.

How Do the 2020 and 2023 NLRB Rules Define Joint Employer?

One of the significant differences between the 2020 rule and the 2023 rule is the element of control, with the 2020 rule emphasizing “substantial direct control” and “immediate control” over at least one of seven essential terms and conditions listed in the rule. “Substantial direct and immediate control” is defined as having a regular or continuous consequential effect on an essential term or condition of employment of another employer's employees, and such control is not substantial if it is sporadic or isolated.

Under the vacated 2023 rule, an employer could be considered a joint employer if the entity had or retained authority to control, directly or indirectly, at least one of the essential terms and conditions of employment, regardless of whether they exercised that control. The list of essential terms under the vacated rule had been expanded to include, among others, workplace health and safety conditions.

Do Other Agencies Address Joint Employment?

While other agencies might rely on similar criteria when determining joint employer status under specific laws, the NLRB’s rule on joint employment is specific to joint employer status under the National Labor Relations Act. The NLRB’s rule should not be confused with the U.S. Department of Labor’s (DOL) standard for joint employment under the Fair Labor Standards Act (FLSA).

What’s Next?

Paychex will continue to monitor any developments around the joint employer topic. Businesses, meanwhile, should stay up to date and consult with their legal counsel to help prepare their business should the NLRB decide to act again on the current rule.

Paychex can help you understand the complexities of the regulations that impact your business and offers HR solutions and services to help make it simpler for you to focus on running your business.