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The proposed rule would readopt a scaled-back version of the 2020 rule and, for the first time, apply a uniform analysis across all three statutes.
On April 23, 2026, the U.S. Department of Labor (DOL) published a notice of proposed rulemaking that would establish a single standard for determining joint employer status under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Since rescinding its 2020 joint employer rule in July 2021, the DOL has offered no regulatory guidance, leaving employers grappling with varying tests applied by federal courts. The proposed rule would readopt a scaled-back version of the 2020 rule and, for the first time, apply a uniform analysis across all three statutes.
What Is a “Joint Employer” and Why Does It Matter?
A joint employer relationship exists when two or more separate businesses simultaneously employ the same worker and share legal responsibility under federal employment laws. Consequences vary by statute. Under the FLSA, joint employers are jointly and severally liable for wages, damages and penalties, and the worker’s weekly hours must be aggregated across joint employers to determine overtime entitlement. Under the FMLA, jointly employed workers count toward each joint employer for coverage and eligibility, but only the “primary” employer must provide leave, give required notices and maintain health benefits; a “secondary” employer may need to restore the employee to the same or equivalent position upon return. Under the MSPA, each joint employer must ensure the worker receives all statutory rights, including timely disclosure of employment terms, accurate payroll records and timely wage payment. In short, a joint employer finding can expose a business to significant liability for workers it does not consider its own.
Background: From the 2020 Rule to Today
The DOL established a four-factor joint employer rule in 2020 during President Donald Trump’s first term that required businesses to exercise “actual” (rather than theoretical) control to be deemed a joint employer. The U.S. District Court for the Southern District of New York vacated the rule’s vertical joint employer standard in New York v. Scalia, 490 F. Supp. 3d 748 (S.D.N.Y. 2020), holding that it conflicted with the FLSA and was arbitrary and capricious. The DOL formally rescinded the rule in 2021 during President Joe Biden’s term, and the 2020 rule has not been replaced.
The Proposed Rule
The proposed rule recognizes two distinct scenarios in which joint employment can arise: vertical joint employment and horizontal joint employment.
Vertical Joint Employment
Vertical joint employment exists when an employee is “jointly employed by two or more employers that simultaneously benefit from the employee’s work.” The traditional example is the staffing-agency arrangement: The worker is indisputably the agency’s employee, and the question is whether the agency’s client, which also benefits from the work, is a joint employer. The same analysis arises in general contractor/subcontractor and other tiered arrangements common in construction, logistics, hospitality and similar industries.
The proposed rule establishes a four-factor test for determining whether a vertical joint employment relationship exists, including 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.
No single factor is dispositive. One important difference from the 2020 rule concerns reserved control: The 2020 rule required the entity to “actually exercise” at least one indicium of control, while the proposed rule treats the ability, power or reserved right to act as “relevant,” though actual exercise of control remains “more relevant.” Indirect control may also count, such as where the higher-tier entity issues mandatory directions to the employer, though a mere request, recommendation or suggestion is generally not enough.
The four-factor test is not exhaustive. The proposed rule allows consideration of additional, generally less probative factors, including the employee’s economic dependence on the potential joint employer, the continuity of the relationship and whether the employee works at a location owned or controlled by the potential joint employer.
By allowing for consideration of “theoretical” control and additional factors related to economic dependence, the DOL through its proposed rule attempts to address the issues the Southern District of New York court took with the 2020 rule. In many ways, the DOL wrote the proposed rule with the prior court decision in mind—a move that may be indicative of how the DOL plans to approach its rulemaking in a post-Chevron world, where courts no longer need to defer to federal agencies’ interpretations of ambiguous statutes.
The proposed rule offers illustrative examples. In one, the proposed rule states that an office park that hires a janitorial company and reserves the contractual right to supervise the workers but, in practice, does not set pay, schedules or supervise their work, is not a joint employer because reserved authority alone is insufficient. By contrast, a restaurant that assigns daily tasks, gives hands-on instructions, tracks worker hours and repeatedly directs the cleaning company to hire or terminate specific workers (which it does without question) is a joint employer based on its direct supervision, recordkeeping and indirect control over hiring and firing.
Horizontal Joint Employment
Horizontal joint employment exists when an employee works separate hours for two or more employers in the same workweek and the employers are “sufficiently associated” with respect to the employment of the employee. Each employer indisputably employs the worker for some hours; the question is whether the relationship between the employers is close enough to make them joint employers.
When horizontal joint employment exists, the employee’s hours across employers must be aggregated for FLSA compliance, and each employer is jointly and severally liable for wages due, including overtime based on the aggregated hours.
Under the proposed rule, employers will generally be sufficiently associated where:
- There is an arrangement 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
- The employers share control of the employee because one employer controls, is controlled by or is under common control with the other employer.
Employers generally are not “sufficiently associated” when their relationship has little to do with the employment of specific workers (e.g., sharing a vendor or franchising under the same franchisor). By contrast, in an example where a cook works 30 hours at one restaurant and 15 at a second restaurant under common ownership, with the two coordinating the cook’s schedule and jointly setting pay, the DOL concludes the restaurants are joint employers and must aggregate the cook’s hours.
Considerations for Employers
Audit Existing Relationships
Companies using staffing agencies, subcontractors, franchisees or other intermediaries should assess vertical joint employment exposure under the four-factor test. Affiliated entities with common ownership or shared services should likewise evaluate the risk of horizontal joint employment.
Review Contracts and Operational Practices for Indicia of Control
Examine service, vendor and franchise agreements and daily practices for provisions granting authority to hire or fire, supervise, direct work, set pay or maintain records for another entity’s workers. Reserved authority and indirect control may now carry weight even absent actual exercise, a meaningful change from the 2020 rule.
Assess FMLA and MSPA Coverage Implications
Employers near the FMLA’s 50-employee threshold should reassess whether the new analysis expands the jointly employed workforce and triggers leave, notice and benefits obligations. Employers of migrant and seasonal agricultural workers should evaluate the impact on existing MSPA compliance.
Consider Submitting Comments
Written comments are due by 11:59 p.m. Eastern on June 22, 2026, via the Federal eRulemaking Portal (RIN 1235–AA48). Employers affected by the proposed rule should consider commenting.
For More Information
If you have any questions about this Alert, please contact Christopher D. Durham, Molly Connor, Jessica Goldstein, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
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