On April 22, 2026, the United States Department of Labor’s Wage and Hour Division (“DOL”) published a notice of proposed rulemaking that aims to revise the DOL’s analysis for assessing joint employer status under three different federal wage and hour laws: the Fair Labor Standards Act (“FLSA”), the Family and Medical Leave Act (“FMLA”), and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”) (the “Proposed Rule”). The Proposed Rule would give employers uniform criteria for determining when two entities may be considered joint employers, establishing a nationwide standard for joint employer liability. The DOL stated it “believes the proposal would promote better business practices, provide certainty, reduce litigation, and enhance uniformity in the way courts and the Wage and Hour Division apply three laws that share the same statutory scope of employment.”
Employers should review the Proposed Rule outlined below and determine if they have comments to submit before the June 22, 2026 deadline.
Background: What is Joint Employment?
Employers are required to comply with federal, state, and local labor laws regarding their employees, and whether these laws apply hinges on the employer-employee relationship. At times an employee formally employed by one employer (the “primary employer”) may be deemed constructively employed by another employer (the “joint employer”) if that joint employer exercises sufficient control over the employee’s terms and conditions of employment. In such instances, both the primary employer and joint employer must comply with pertinent labor laws, and each may be liable for any wage and hour or other labor law violations. Some examples of where these relationships commonly arise are in the hospitality and construction industries.
Horizontal Joint Employment
First, the Proposed Rule sets out factors for identifying horizontal joint employment, which exists when an employee works separate hours for two or more sufficiently associated employers in the same workweek. Under the Proposed Rule, employers are sufficiently associated with respect to the same employee if:
- There is an arrangement between them to share the employee’s services;
- One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
- They share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.
The Proposed Rule makes clear that business relationships with little to do with the employment of specific employees, such as sharing a vendor or being franchisees of the same franchisor, are alone insufficient to establish joint employment. This is not a significant departure from the existing horizontal joint-employer test.
Vertical Joint Employment
Second, the Proposed Rule seeks to adopt a four-factor analysis for vertical joint employment, which exists when two or more employers simultaneously benefit from the same employee’s work. Examples of this are traditional staffing agency/client relationships or contractor/subcontractor relationships. To determine whether there is vertical joint employment, the Proposed Rule 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.
Although additional factors may be relevant, under the Proposed Rule a unanimous finding on the four factors above would establish a “substantial likelihood” of joint employer status. This uniform federal test would replace the current jurisdiction-by-jurisdiction approach.
Weighing of Other Factors
The Proposed Rule treats a potential joint employer’s ability, power, or reserved right to act (i.e., “reserved control”) in relation to an employee as relevant to the joint employer analysis, but gives greater weight to the actual exercise of control. The DOL explains that this “more nuanced position” – which recognizes that exercised control is more relevant than reserved control, without requiring actual exercise of control as a prerequisite for joint employment – is more consistent with the FLSA and longstanding caselaw, which focus on the “degree” of control and “‘economic reality’ of the situation.”
The Proposed Rule lists additional factors the DOL considers worth weighing in assessing vertical joint employment, though less significant than the four factors above. These include: whether the worker has a continuous or repeated relationship with the potential joint employer; whether the employee works at a location or facility owned or controlled by the potential joint employer; indicators of whether the potential joint employer exercises significant control over the terms and conditions of the employee’s work; and whether the employee is economically dependent on the potential joint employer for work.
Exclusions in Considering Joint Employer Status
The Proposed Rule also excludes the consideration of the following three factors in assessing joint employer status:
- Whether the employee is in a job that otherwise requires special skill, initiative, judgment, or foresight;
- Whether the employee has the opportunity for profit or loss based on his or her managerial skill; and
- Whether the employee invests in equipment or materials required for work or the employment of helpers.
In excluding these factors, the DOL explains that, while they are relevant to determining whether a worker is an employee or an independent contractor, they have no bearing on whether a worker has joint employers.
Finally, the Proposed Rule also makes clear that certain business models and business practices, standing alone, do not make joint employer status more or less likely. These include certain contractual agreements relating to health, safety, or legal compliance; providing sample employee handbooks to another employer; offering association health or retirement plans to another employer; jointly participating in apprenticeship programs; operating as franchisors; and standardizing quality control standards. These practices are identified as basic and “often best” business practices, but the clarity in the Proposed Rule is intended to provide “confidence that such responsible behavior itself will not result in joint employer status.”
If retained in the Final Rule, these exclusions will provide employers with concrete guidance on the factors that fall outside the joint-employer analysis.
Next Steps
Employers should monitor the Proposed Rule and consider submitting any comments to the DOL, which are due by June 22, 2026. If adopted, the Proposed Rule will establish a nationwide standard employers can rely on when entering into business relationships that may implicate a joint employer analysis. Employers should take steps now to ensure they understand its impact on the rights and obligations of both employers and employees in potential joint-employer relationships.
Your Hinckley Allen Labor & Employment attorneys will continue to monitor developments and will provide updates as they become available.