The U.S. Department of Labor’s (“DOL”) Wage and Hour Division announced a proposed rule on April 22, 2026, to address how “joint employer” status is determined under the Fair Labor Standards Act (“FLSA”), Family and Medical Leave Act (“FMLA”), and Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). The DOL’s previous attempt at a joint employer rule, issued in 2020, was rescinded in 2021 following its partial invalidation in New York federal court. The proposed rule was published in the Federal Register on April 23.
The DOL’s new proposal—which appears to be a practical effort at clarification rather than an attempt to blaze new trails—would set a unified standard across the FLSA, FMLA, and MSPA for when two or more entities share responsibility for the same workers. Companies using staffing agencies, subcontractors, franchise models, or other multi-employer arrangements should take note.
What Is “Joint Employer” Status and Why Does It Matter?
A “joint employer” relationship exists when two or more entities simultaneously employ the same worker and share legal obligations under federal employment laws. Under the FLSA, joint employers are jointly and severally liable for wage and hour violations, and hours worked for all joint employers must be aggregated for overtime calculations. Under the MSPA, each joint employer must ensure migrant and seasonal agricultural workers get all statutory protections. For the FMLA, all joint employers must count jointly employed workers for coverage and eligibility, but only the “primary employer” provides leave and benefits. A joint employer finding can expose a business to liability for workers it may not consider its own employees.
Vertical and Horizontal Joint Employment
The proposed rule distinguishes between two types of joint employment:
- Vertical joint employment occurs when an employee has a recognized employer, but another entity benefiting from the work may also qualify as an employer—such as in staffing agency arrangements.
- Horizontal joint employment occurs when a worker performs separate hours for two or more associated employers in the same workweek, requiring combined hours for overtime purposes.
Proposed Four-Factor Test for Vertical Joint Employment
The core of the proposed rule is a four-factor test for vertical joint employment, in which no single factor is dispositive. Proposed Section 791.115 asks 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 (meaning payroll and similar records that reflect hiring, firing, supervision, pay, or scheduling).
This test is similar, but not identical, to the challenged and rescinded 2020 rule. Most notably, the 2020 rule provided that contractually reserved control over employment terms could not establish joint employer status “without some actual exercise of control.” The current proposal backs away from this bright-line rule, stating that the ability, power, or reserved right to act in relation to the employee “is relevant” although the actual exercise of such control remains “more relevant[.]”
Additionally, while the 2020 rule excluded economic dependence as a factor, the proposed rule allows consideration of additional factors that “may be relevant” in addition to the four factors detailed above—including whether the employee has a continuous relationship with the potential joint employer, is economically dependent on the potential joint employer for work, or works at a location the potential joint employer controls. Such additional factors can tip the balance if the primary factors are unclear.
The proposed rule also excludes consideration of factors that are “primarily probative of a worker’s status as an employee or independent contractor” (generally, whether the job requires special skill; whether the employee has opportunity for profit or loss; and whether the employee invests in equipment/materials required for work).
Horizontal Joint Employment Standard
The proposed rule also restores the DOL’s longstanding standard for horizontal joint employment. If two employers act independently and are not associated regarding a worker, each can ignore hours worked for the other. But if employers are “sufficiently associated,” they are joint employers and must aggregate the worker’s hours for FLSA compliance, including overtime. Proposed Section 791.120 provides that employers will generally be considered sufficiently associated if: (1) they have an arrangement to share the employee’s services; (2) one employer acts in the interest of the other in relation to the employee; or (3) they share control of the employee, such as through common ownership. Business relationships unrelated to employment, like sharing a vendor or being franchisees of the same franchisor, are not enough to establish joint employment.
This standard is not new; the DOL calls it “longstanding and well-settled,” consistent with prior regulations and rules. However, the proposed rule would restore it to the official regulatory framework, which is significant for businesses with employees working for multiple related entities in the same week.
Neutral Business Practices in Joint Employer Analysis
In addition to the above, proposed Section 791.125 lists certain business practices that are essentially neutral to the analysis, because they would not make joint employer status more or less likely. These include operating as a franchisor, requiring compliance with general legal obligations or health and safety standards, imposing quality control requirements, providing sample handbooks or operational documents, and offering association health plans.
Unifying the Standard Across FLSA, FMLA, and MSPA
Both MSPA and the FMLA incorporate the FLSA’s definitions of “employ” and “employee,” which the DOL views as supporting a single analytical framework across all three statutes. Accordingly, the DOL proposes to amend FMLA and MSPA regulations to reference the new FLSA framework, applying the FLSA test across all three statutes. For the FMLA, the “primary” and “secondary” employer distinction would remain, but the new unified standard could change which entities are deemed joint employers and thus affect eligibility determinations—particularly the 50-employee coverage threshold. For the MSPA, the proposed rule removes economic dependence as the “ultimate question” and eliminates consideration of “repetitive, rote tasks,” though the DOL expects outcomes to remain similar.
Action Items
Following the Supreme Court’s 2024 ruling in Loper Bright v. Raimondo, courts need not defer to agency regulations but may still look to them for guidance. If adopted, this proposed rule could impact joint employer liability findings for businesses using multi-entity staffing and operational models. Companies should consider these steps in the meantime to assess their potential risk:
- Audit relationships. Companies using staffing agencies, subcontractors, or other intermediaries should evaluate whether they actually hire or fire, supervise, set pay, or maintain records for workers employed by others.
- Review contract terms. Although actual exercise of control remains paramount, reserved control—broad rights to direct, discipline, or terminate another entity’s workers—has some relevance under the proposed rule.
- Consider FMLA applicability. Businesses near the 50-employee FMLA threshold should assess whether the new analysis could result in additional “jointly employed” workers that would trigger leave and notice obligations.
- Submit comments. Businesses with concerns should consider submitting comments on the proposed rule before the public comment period ends at 11:59 p.m. ET on June 22, 2026.
