Federal Appeals Court Upholds NLRB Joint-Employer Standard

Federal Appeals Court Upholds NLRB Joint-Employer Standard

On May 10, 2026, the U.S. Court of Appeals for the District of Columbia Circuit upheld the National Labor Relations Board’s (NLRB) 2023 joint-employer rule. This decision reaffirms the criteria under which businesses can be considered joint employers, significantly affecting franchise operations and staffing agencies.

The NLRB's rule, effective December 2023, states that a company is a joint employer if it has indirect control over essential employment terms, such as hiring, firing, discipline, supervision, and direction (84 Fed. Reg. 69694). This broad definition expands potential liability for labor violations and collective bargaining obligations.

Implications for Employers

Companies using franchise models or staffing agencies must now consider the potential for increased liability under the joint-employer standard. The ruling means that such businesses could be held responsible for unfair labor practices or required to engage in collective bargaining if deemed a joint employer with another entity.

This decision has particular implications for industries heavily reliant on subcontracting and temporary staffing. Employers in these sectors should reassess their contractual agreements and operational practices to determine if they meet the joint-employer criteria.

Action Items for Employers

1. Review Contracts: Employers should scrutinize contracts with third-party service providers and franchises. Focus on clauses related to control over employment terms and conditions.

2. Evaluate Operational Practices: Assess your level of control over workers provided by staffing agencies or franchises. Adjust practices to minimize potential joint-employer risks.

3. Consult Legal Counsel: Engage with legal experts to understand the implications of the joint-employer standard on your business operations and compliance obligations.

4. Training for Managers: Educate managers on the ramifications of the joint-employer standard and ensure they understand the importance of maintaining appropriate boundaries in labor relations.

Looking Ahead

With this ruling, businesses must navigate the complexities of joint-employer status carefully. The decision may prompt further legal challenges or legislative action, but for now, employers must align their practices with the NLRB’s definition to mitigate risks. As the landscape evolves, staying informed on changes and legal interpretations will be crucial for compliance and strategic planning.