Employers in California and across the country are still adjusting to back-and-forth standards created between the past two presidential administrations. The NLRB’s analysis of joint employer standards is one area of shifting expectations that has left employers unsure what standard controls. In February, the National Labor Relations Board (NLRB) took a step toward resolving that question by issuing a final rule clarifying that joint employer liability may only apply to a company that exercises “substantial direct and immediate control” over a worker.

Solidifying joint employer standards is essential to California employers, many of whom have nationwide operations and work closely with vendors to provide necessary services that complement the company’s core mission. Clarity on this point is critical, as employers who are found to jointly employ another company’s workers may become liable for wage and hour violations and other alleged unlawful employment practices. The NLRB’s most recent rule will be welcomed by those employers who rely on clear delineation between the employees they directly control, and those who are controlled by third parties.

Biden NLRB Era Standard

The NLRB’s new rule reverses a substantive change to joint employer standards implemented during the Biden Administration in 2023. Under that rule, a company could be deemed a joint employer if it had the authority to control essential terms of employment, whether or not the company actually exercised that control. A federal district court in Texas vacated that rule before it went into effect, finding that its effect was overly broad because it failed to require consideration of a company’s actual exerted control to attach joint employer liability. Some legal observers opined that once the Biden Administration rule had been vacated, the Trump Administration’s 2020 joint employer rule should be applied.

The dual existence of the 2020 Trump Administration rule and the vacated Biden Administration rule created untenable and unpredictable standards for employers to follow. The recent NLRB action sought to resolve that tension by solidifying the Trump Administration’s prior action.

Trump NLRB’s Reinstated Rule

By reinstating the Trump Administration’s 2020 rule, the NLRB now focuses on the manner in which an employer directly and actually controls the terms and conditions of employment. Under the rule, a business may be found to jointly employ a worker only when it possesses and exercises “such substantial direct and immediate control over one or more essential term[s] or condition[s] of their employment” that “meaningfully affects matters relating to the employment relationship.” Put another way, if a company has the authority to exercise control, but does not actually do so, it likely would not be deemed a joint employer under the new rule.

To determine whether a company actually controls the terms and conditions of employment, courts may consider the following factors:

1. Wages. An entity exercises direct and immediate control over wages if it actually determines the wage rates, salary, or other rate of pay that is paid to another employer’s individual employees or job classifications.
2. Benefits. An entity exercises direct and immediate control over the benefits if it actually determines the fringe benefits to be provided or offered to another employer’s employees.
3. Hours of Work. An entity exercises direct and immediate control over hours of work if it actually determines work schedules or the work hours, including overtime, of another employer’s employees.
4. Hiring. An entity exercises direct and immediate control over hiring if it actually determines which particular employees will be hired and which employees will not.
5. Discharge. An entity exercises direct and immediate control over discharge if it actually decides to terminate the employment of another employer’s employee.
6. Discipline. An entity exercises direct and immediate control over discipline if it actually decides to suspend or otherwise discipline another employer’s employee.
7. Supervision. An entity exercises direct and immediate control over supervision by actually instructing another employer’s employees how to perform their work or by actually issuing employee performance appraisals.
8. Direction. An entity exercises direct and immediate control over direction by assigning particular employees their individual work schedules, positions, and tasks.

Importantly, a minor or passing impact on a term of condition would be insufficient to establish joint employer liability. Rather, the company must exert “regular or continuous consequential effect” over a term of employment to be deemed a joint employer. By contrast, an employer that “contractually reserved but never exercised authority” over a term of employment likely would not be deemed a joint employer liability under this rule.

Practical Considerations for Employers

For employers, the NLRB’s return to the 2020 Trump Administration standard means there is a higher bar to establish joint employer liability. Specifically, a company may be a joint employer if it exercises substantial direct control over the factors listed above.

To avoid joint employer liability, companies should ensure that their agents refrain from enacting “substantial direct and immediate control” of each of the above categories. In practice, this means coaching managers to be intentional about treating bona fide employees separately from on-site workers who are employed by other companies, such as third party vendors.

The reinstatement of this higher standard does not mean indirect control is meaningless. In fact, evidence of indirect control may still be relevant to the joint employer analysis, so long as direct control over the employee is established. Also, as the past six years have shown, the current iteration of the joint employer standard is not set in stone. Lowering the amount of direct and indirect control over third party workers may benefit companies if the next administration adjusts the joint employer standard yet again.

Reprinted with permission from the April 3, 2026 issue of law.com © 2026 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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