DOL Proposes New Joint Employer Rule: What You Need to Know

A new joint employer rule is on the table. The DOL’s proposed standard could determine when your organization shares liability with another employer 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 Notice of Proposed Rulemaking was published in the Federal Register on April 23.

2 Types of Joint Employment Addresses in Proposed Rule

The proposal addresses both vertical and horizontal joint employment.

Vertical Joint Employment: 4-Factor Test

For vertical joint employment – situations such as staffing agency/client or contractor/subcontractor relationships – a four-factor test determines whether a business is a joint employer:

1. Whether it hires or fires the employee
2. Whether it supervises and controls the employee’s work schedule or conditions of employment to a substantial degree
3. Whether it determines the rate and method of payment, and
4. Whether it maintains the employee’s employment records.

No single factor is dispositive.

Horizontal Joint Employment Focuses on the Relationship Between Employers

For horizontal joint employment – where an employee works separate hours for two or more employers in the same workweek – the proposal retains a long-standing “sufficiently
associated” standard based on the relationship between the employers.

The rule emphasizes that actual exercise of control matters more than a reserved or
contractual right to control – and that franchisor status alone does not establish a
joint employer relationship.

The proposal would amend FMLA and MSPA regulations so the FLSA analysis, codified at 29 CFR Part 791, governs joint employer status across all three laws.

Comments are due 11:59 p.m. ET on June 22, 2026.

If finalized, the proposed rule would restore a defined regulatory standard for joint-employer
status that the 2021 rescission of the 2020 Trump-era rule eliminated.

Since 2021, the DOL has provided no uniform regulatory guidance, and courts in different
circuits have applied varying standards – some broader, some narrower – leaving
franchisors, staffing firms and subcontractors exposed to back-wage and FMLA leave liability based on indirect or reserved control.

Until the proposed rule is final, joint-employer status continues to be determined under varying court-applied standards that differ by circuit.

Payroll Action Steps for the Proposed Joint Employer Rule

• Track the rulemaking through the comment period and watch for a final rule.
• Review staffing-agency, subcontractor and franchise agreements for clauses that reserve control over scheduling, pay rates or hiring. Under the proposed test, actual exercise of control carries more weight than reserved rights, but those clauses can still be relevant evidence.
• For franchised operations, consider whether payroll-administration responsibility – timekeeping, wage administration and W-2 issuance – is clearly with the operator rather than the franchisor.
• Identify shared employees and document who directs day-to-day work, so documentation is in place if the proposed rule is finalized.
• Consider submitting comments by June 22, 2026, 11:59 p.m. ET.