DOL Unveils New Proposed Rule for Joint Employer Liability

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Quick Hits

• The DOL has issued a new proposed rule to clarify when joint-employer liability exists under the FLSA, aiming to establish a nationwide standard.
• The rule also incorporates the joint-employer standards into the rules implementing the FMLA and the MSPA.
• The proposal sets forth a four-factor test for vertical joint employment that recognizes the relevance of a potential joint employer’s reserved right to control but that also emphasizes that actual exercise of control is more relevant to determining joint employer status.
• The proposed rule would further clarify that common business arrangements, such as franchisor arrangements and requirements to comply with general legal obligations or health and safety standards, do not alone establish joint-employer status.

The DOL states that the proposal reflects the “commonality” between federal court precedents and resolves a circuit split to create a nationwide standard. The notice of proposed rulemaking (NPRM), titled “Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave, and Migrant and Seasonal Agricultural Worker Protection Act,” will be published in the Federal Register on April 23, 2026.

Defining Joint-Employer Liability

According to the DOL, the proposed rule would establish a nationwide standard for use by the DOL’s investigators and enforcement personnel, promote clarity and uniformity for employers and employees, reduce litigation, and ensure that joint-employer status determinations under FMLA and MSPA regulations align with the DOL’s FLSA analysis and the FLSA’s employment definitions.

Under the FLSA, when two or more employers are found to be joint employers, those employers are jointly and severally liable for any wages, damages, and other relief that may be owed to workers, including pay for all hours worked for all joint employers and any overtime premiums that may be due.

Similarly, regulations under the FMLA, which adopt the FLSA’s definitions of “employ” and “employee,”  require that joint employers provide the leave and job reinstatement protections under the FMLA. Regulations under the MSPA, which provide employment and wage protections for most farmworkers, recognize that the term “employ” includes joint employment.

An Evolving Joint-Employer Standard

The proposed rule is the DOL’s first attempt to define its interpretation of joint-employer liability under the FLSA since July 2021, when the Biden administration rescinded a prior DOL joint-employer rule amid a federal court challenge.

The prior joint-employer rule, issued in January 2020 during President Trump’s first term, set out a four-part balancing test similar to the DOL’s new proposed rule that evaluated “the potential joint employer’s exercise of control over the terms and conditions of the employee’s work.” That rule focused not on the potential joint employer’s “ability, power, or right” to control but on whether the employer actually exercised control.

However, the U.S. District Court for the Southern District of New York largely vacated that 2020 rule, finding that its narrowed interpretation of joint-employer status contradicted the broad definitions of “employer,” “employee,” and “employ” in the FLSA. On July 30, 2021, the DOL formally rescinded the 2020 rule. The DOL later dropped its appeal, and the U.S. Court of Appeals for the Second Circuit dismissed the case as moot.

Distinguishing Joint-Employer Liability

Like the 2020 rule, the DOL’s new proposed joint-employer rule distinguishes vertical joint employment, where an employee is “jointly employed by two or more employers that simultaneously benefit from the employee’s work,” such as traditional staffing agency/client or contractor/subcontractor relationships, and horizontal joint employment, where an employee works separate hours for two or more employers in the same workweek, but the employers are “sufficiently associated with each other.”

The new proposed rule attempts to avoid the 2020 rule’s pitfalls, recognizing that the FLSA’s definitions for “employer,” “employee,” and “employ” and a potential joint employer’s reserved right to control an employee are relevant to the joint-employer analysis.

Vertical Joint Employment: Four-Factor Test

The proposed rule would, like the 2020 rule, establish a four-factor test based on federal case law to determine where vertical joint employment exists, where no single factor would be dispositive and the ultimate determination of joint-employer status would depend on all facts in the case. The test would turn on 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.”

Much like the DOL’s independent contractor rule proposed in February 2026, the joint employer rule explains that additional factors may be relevant, but that a unanimous finding on the four main factors in either direction would establish a “substantial likelihood” regarding joint employment status.

Unlike the 2020 rule, which required a potential joint employer to actually exercise control, the proposed rule would state that an employer’s “ability, power, or reserved right to act in relation to the employee is relevant for determining joint employer status.” (Emphasis added). However, the proposed rule states that “the potential joint employer’s actual exercise of control is more relevant than such ability, power, or right.” (Emphasis added). The DOL argues in the NPRM that this is a “more nuanced position” and “is more consistent with the FLSA and longstanding caselaw.”

Horizontal Joint Employment: ‘Sufficiently Associated’

Where there is horizontal joint employment, employees’ total hours worked in a week for each employer must be aggregated for FLSA compliance, and each employer would be “jointly and severally liable” for wages due under the FLSA, including any overtime premiums based on the aggregated hours. The proposed rule largely retains the long-standing analysis from the pre-2020 regulations for horizontal joint employment, which focuses on the relationship between employers based on all the facts and circumstances.

Under the proposed rule, two employers would be considered “sufficiently associated” if:

• “there is an arrangement between them to share [an] 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.”

Excluding Common Business Practices

The new proposed rule, like the 2020 rule, seeks to exclude certain common general business models, which, “standing alone,” would not “categorically or in the abstract make joint employer status more or less likely under the FLSA, FMLA, or MSPA”:

• Operating as a franchisor or brand-and-supply arrangements or similar business models 

• Contractual provisions requiring compliance with general legal obligations or health and safety standards 
• Requiring quality control standards to protect brand reputation 
• Providing sample employee handbooks, association health/retirement plans, or participating in apprenticeship programs 

Next Steps

The DOL’s proposed rule is not final and, if finalized, would provide only interpretive guidance for WHD’s enforcement activities. Courts can and will apply their own standards in litigation regarding joint-employer liability. Nevertheless, employers may want to evaluate their relationships with staffing agencies, subcontractors, franchisees, and other entities and consider where joint-employment questions could arise. 

Additionally, the National Labor Relations Board (NLRB) also recently issued a final rule for joint-employer liability under the National Labor Relations Act (NLRA). That rule, which the NLRA issued without notice and comment, focuses on whether employers “share or codetermine the employees’ essential terms and conditions of employment.”

Employers and other stakeholders will have an opportunity to comment on DOL’s new proposed rule, including the four-factor test for vertical joint employment and proposed revisions to the FMLA and MSPA regulations. Comments are due within sixty days of the proposed rule’s publication in the Federal Register.

Ogletree Deakins’ Wage and Hour Practice Group will continue to monitor developments and will provide updates on the Leaves of Absence and Wage and Hour blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

Editor’s Note: This article was last updated on April 28, 2026, to clarify unanimous finding on one factor would establish a “substantial likelihood.” This article was updated on April 22, 2026, with additional information on the proposed rule.

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