The DOL Issues New Proposed Rule on Joint Employer Status

On April 22, 2026, the U.S. Department of Labor’s Wage and Hour Division (“DOL”) issued a Notice of Proposed Rulemaking (“NPRM”) that would revise how joint employer status is determined under the Fair Labor Standards Act (“FLSA”) and extend that same analysis to the Family and Medical Leave Act (“FMLA”) and Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”).

If finalized, the rule would reinstate regulatory guidance for joint employment under the FLSA, which has been absent since 2021, and would replace the existing joint employer standards under the FMLA and MSPA with a unified framework based on the FLSA’s employment definitions.

Overview of the Proposed Framework

The NPRM proposes to clarify joint employer status under the FLSA by restoring regulations at 29 C.F.R. Part 791, where the DOL’s joint employer rules were located prior to 2021. Under the proposal, the same FLSA-based analysis would also govern joint employer determinations under the FMLA and MSPA.

The DOL explained that the proposed rule is intended to provide greater uniformity and predictability in an area where courts and agencies have applied differing tests and standards, and to establish a nationwide standard for use by enforcement personnel.

DOL’s Proposed Joint Employer Framework

The NPRM identifies two recognized forms of joint employment: horizontal and vertical joint employment.

Horizontal Joint Employment

With respect to horizontal joint employment, the NPRM proposes to readopt the longstanding FLSA framework reflected in the DOL’s 2020 Rule. Under this approach, the analysis centers on the relationship between the employers, rather than the employee. Horizontal joint employment may exist 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.

When horizontal joint employment exists, an employee’s hours worked for all joint employers in a workweek must be aggregated for purposes of FLSA compliance. Each employer is jointly and severally liable for wages due under the Act, including any overtime premiums based on the aggregated hours.

Vertical Joint Employment and the Four-Factor Test

For vertical joint employment, the proposed rule adopts a four-factor framework, applied in every case, to determine whether an entity is acting as a joint employer of a worker employed by another entity. The analysis considers 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 would be dispositive. Instead, the analysis focuses on the totality of the circumstances. The NPRM explains that while additional factors may also be relevant in some cases, a unanimous finding on the four factors in either direction would indicate a substantial likelihood that joint employment does or does not exist. Additionally, “reserved control” may be considered, but is less indicative of vertical joint employment than exercised control, consistent with the judicial focus on “economic reality” in FLSA employment disputes.

Additional Considerations and Factors Not Considered

The NPRM also clarifies that certain considerations are not relevant to the joint employer analysis because they relate to the employee-independent contractor distinction rather than joint employment. These include factors such as whether the worker exercises special skill or initiative, has an opportunity for profit or loss based on managerial skill, or makes capital investments in equipment or materials.

The DOL further emphasizes that actual exercise of control is generally more probative than reserved or contractual authority that is not exercised.

Why Does This Matter?

Joint employer status carries significant implications under the FLSA, FMLA, and MSPA. When joint employment is found, multiple entities may share responsibility for minimum wage, overtime, and leave obligations. Businesses that rely on staffing agencies, subcontractors, franchise models, or other multi-entity work arrangements may therefore face increased compliance risks depending on how these relationships operate in practice.

What Happens Now?

This NPRM does not change the law at this time. The DOL will receive and review public comments on the proposal before determining whether to issue a final rule.

If a final rule is adopted, its overall impact may be more limited than in past rulemakings. Because of the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo overturning Chevron deference, courts are less likely to defer to the DOL’s interpretation and instead each federal circuit may apply its own test/precedent for determining joint employer status. As a result, any changes to the joint employer definition may be more likely to affect DOL enforcement proceedings than private litigation.

Interested parties may submit comments on the proposed rule through June 22, 2026.