On April 22, 2026, the U.S. Department of Labor’s (DOL) Wage and Hour Division published a proposed rule that would establish a federal standard for determining when two or more entities qualify as “joint employers” under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The proposal focuses on actual control over workers, rather than broad, theoretical authority. If finalized, the proposal is expected to reduce the likelihood that multiple entities will be deemed jointly liable for wage and hour violations. The public can comment on the proposal through June 22, 2026.
The proposed rule is particularly relevant for businesses that rely on staffing agencies, subcontractors, franchisees, and on-site vendors. Any company that uses third-party labor — whether temp workers on a production line, contracted janitorial crews, or franchised operations — should pay close attention.
What Does It Mean to Be a Joint Employer?
Joint employer status is not merely a classification issue; it is a liability issue. If two entities are deemed joint employers, each can be held responsible for wage and hour violations, including unpaid wages and overtime. As a practical matter, this means a business working with a staffing company could be on the hook for wage law violations even if it did not directly “employ” the worker. The proposed rule describes two joint employment scenarios:
- Vertical joint employment: An individual works one set of hours in one position but two or more employers simultaneously benefit from the work. The question is whether the other entity — typically a staffing agency client or upstream contractor — also qualifies as the worker’s employer.
- Horizontal joint employment: An individual works separate hours for two or more related entities during a workweek. If those entities are sufficiently associated — for example, through shared services, common ownership, or acting in the interest of one another — the worker’s hours must be combined when calculating overtime.
The consequences of a joint employer finding differ depending on the statute:
- FLSA: Joint and several liability for minimum wage and overtime violations; hours worked across joint employers may be aggregated for overtime purposes.
- FMLA: Affects employee counting for coverage and eligibility; allocates primary versus secondary employer responsibilities for notices, health benefits, and job restoration.
- MSPA: Extends liability for required disclosures, pay, housing, and transportation compliance to upstream entities that effectively control the work.
What Is the DOL Proposing?
The proposed rule adopts a four-factor test to analyze vertical joint employment relationships. The analysis examines whether the potential joint employer:
- Hires or fires the employee;
- Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
- Determines the employee’s rate and method of payment; and
- Maintains the employee’s employment records.
If all four factors point toward joint employment, there is a “substantial likelihood” the entity is a joint employer — and, conversely, if all four point the other way, there is a substantial likelihood it is not. The proposed rule allows for the consideration of additional factors, although the four enumerated factors carry the most weight.
While this framework echoes the DOL’s 2020 final rule, there are important substantive differences, including:
- Reserved control now matters. The proposed rule considers an entity’s contractual rights to direct work, approve pay rates, or influence employment decisions, although an entity’s actual exercise of control over workers remains more determinative. By contrast, the 2020 rule treated reserved or contractual control as irrelevant.
- Economic dependence is back on the table. The proposed rule does not categorically exclude factors relating to a worker’s economic dependence, although such factors carry less weight than the core four. The 2020 rule had prohibited this consideration entirely.
The proposed rule also expressly excludes certain common business practices from the joint employer analysis, including:
- Contractual agreements related to health, safety, or legal compliance
- Providing a sample employee handbook
- Offering association health or retirement plans
- Jointly participating in apprenticeship programs
- Operating as a franchisor or entering into a brand and supply agreement
- Providing quality control standards
The exclusion of these practices gives employers more latitude to maintain brand integrity and ensure legal compliance without triggering joint employer liability.
Don’t Forget Your Local Rules
Even if the proposed rule is finalized, it would serve as interpretive guidance and would not be binding on courts. The various joint employer analyses adopted by the federal and state courts will remain in effect, and employers must continue to follow potentially more stringent standards that may apply under state law.
