DOL Proposes New Rule on Joint Employer Liability

On April 22, 2026, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) released a proposed rule for determining when multiple employers may be held jointly liable. For HR professionals, the proposal has significant implications for how your organization structures its staffing, contractor and vendor relationships.

The proposal seeks to unify three labor laws, applying to enforcement 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 DOL said that the proposed rule, titled, “Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave, and Migrant and Seasonal Agricultural Worker Protection Act,” reflects the “commonality” between federal court precedents on joint employer status—where two or more employers may be found jointly and severally liable for wage and hour violations—and seeks to establish a consistent national standard for enforcement.

The Shifting 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to define its interpretation of joint employer liability under the FLSA since July 2021, when the Biden administration rescinded a prior 2020 DOL joint employer rule after it was largely vacated by a federal court. HR professionals should be aware that the standard governing when your organization may be treated as a joint employer has shifted multiple times in recent years, creating ongoing uncertainty for workforce planning and vendor management.

The previous joint employer rule was issued in January 2020 during President Trump’s first term and established 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 on whether the employer actually exercised control, and not on the potential joint employer’s “ability, power, or right” to control.

The 4-Factor Test for Vertical Joint Employment

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, defined as situations 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. No single factor would be dispositive, and the ultimate determination of joint-employer status would depend on all facts in the case. The test evaluates 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 proposed rule that this is a “more nuanced position” and “is more consistent with the FLSA and longstanding caselaw.”

For HR professionals, this means that even where your organization has never actually exercised control over a contractor’s or vendor’s employees, the mere fact that your contracts reserve the right to do so could weigh toward a joint-employer finding—making it worth reviewing your staffing and vendor agreements.

‘Sufficiently Associated’ Standard for Horizontal Joint Employment

Where there is horizontal joint employment—defined as where an employee works separate hours for two or more employers in the same workweek, but the employers are “sufficiently associated with each other”—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.”

Excluded Business Practices

The new proposed rule, like the 2020 rule, seeks to exclude certain common general business models from determining joint employer status:

• 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 

Key Takeaways

The DOL’s proposed rule is not final and, if finalized, would provide interpretive guidance for WHD’s enforcement activities, meaning it would directly shape how audits and investigations of your organization are conducted.

Employers and other stakeholders may submit comments on the proposed rule and the four-factor test during the public comment period. In the meantime, organizations should assess their exposure and evaluate whether any operational or contractual changes are warranted.

Thus, HR professionals should consider whether your current staffing agency, contractor and vendor arrangements could trigger joint employer status under these proposed changes.

Zachary V. Zagger, Senior Marketing Counsel at Ogletree Deakins, contributed to this article.