What's Happening?
The National Labor Relations Board (NLRB) has reinstated the 2020 joint employer standard, affecting private California employers, particularly those using staffing agencies, subcontractors, franchise models, or management agreements. This decision follows
a federal court ruling in Texas that vacated the 2023 rule, which had expanded joint employer status to include indirect or reserved control over essential employment terms. The reinstated 2020 rule requires substantial direct and immediate control over essential terms such as wages, discipline, hiring, and supervision to establish joint employer status. This shift marks a return to a narrower, employer-friendly standard, but the issue remains politically and legally unsettled.
Why It's Important?
The reinstatement of the 2020 joint employer standard is significant for California businesses as it limits the risk of being classified as joint employers, which can lead to collective bargaining obligations, unfair labor practice liability, and pension and benefit plan exposure. Employers may be required to bargain with unions representing another entity's employees or become liable for contributions to multiemployer pension or health funds. This decision impacts industries such as construction, healthcare, logistics, and hospitality, where exposure to union benefit fund contributions and withdrawal liability can be substantial. The ruling provides temporary relief but underscores the volatility of labor policy, necessitating strategic planning by employers.
What's Next?
Employers should prepare for potential shifts in the joint employer standard due to appellate court decisions, revised Board rules, congressional legislation, or changes in the NLRB's composition. Businesses are advised to audit contracts with staffing firms and contractors, review franchise agreements, and limit unnecessary operational control over third-party employees. The NLRB's joint employer law is expected to remain unstable, and employers should plan for rapid changes in federal labor policy, especially with the possibility of a new administration in 2028.
