DOL Rethinks Joint Employer Standard: Proposal Revisits, Revises 2020 Rule

Takeaways

• The DOL has proposed a new rule that would reshape how joint employer status is analyzed under the FLSA. The standard, if finalized, would also define joint employment under the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act.
• Although the proposed rule draws from the DOL’s 2020 framework, it moves back toward a more expansive and practical view of joint employment, particularly in light of recent court decisions.
  The public comment period ends on 06.22.26.

Related links

• 91 Fed. Reg. 21878: Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act
• Department of Labor Issues Final Rule on FLSA’s Joint Employer Standard
• New York Federal Court Strikes Down Primary Element of DOL’s New ‘Joint Employer’ Rule
• Labor Department Formally Withdraws Trump-Era Joint Employer Final Rule
• NLRB Goes Back to the Employer-Friendly Future as It Reinstates Strict Joint-Employer Rule
• Questions and Answers – NPRM: Joint Employer Status Under the FLSA, FMLA, and MSPA

Article

The Department of Labor’s (DOL) Wage and Hour Division published a proposed rule on April 23, 2026, adopting a standard to determine joint employer status under the Fair Labor Standards Act (FLSA). According to DOL, the proposed rule would fill a regulatory gap and, if finalized, create a nationwide standard and bring “greater uniformity and consistency to the Department's enforcement actions by adopting a transparent nationwide analysis, which could have benefits for all interested parties.”

The standard in the proposed rule is similar to a final rule issued in 2020 during the first Trump Administration. That rule was partially invalidated by a federal court and was formally rescinded in 2021 by the Biden DOL. The current proposed rule reflects consideration of the court’s 2020 decision rejecting certain provisions in the 2020 rule.

Courts have adopted various multifactor tests to analyze joint employment under the FLSA. In the proposed rule’s preamble, the DOL said the rule “is broadly consistent with the commonality among varying approaches to joint employment in the federal circuit courts.” The proposed rule also would assist businesses in structuring their operational models and business practices, according to the preamble.

The proposed rule also would define who is a joint employer under the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act, which incorporate the FLSA’s definition of “employ.” The DOL’s rule would not apply to other federal statutes, such as the National Labor Relations Act (NLRA). The National Labor Relations Board recently adopted its own final rule defining joint employer under the NLRA.

The DOL has issued an accompanying “Questions and Answers” document. The agency is accepting comments on the proposed rule through June 22.

Joint Employment

The proposed rule describes two joint employment scenarios:

1. “Vertical” joint employment - an individual “is jointly employed by two or more employers that simultaneously benefit from the employee’s work.” In this scenario, the employee works in one position, and the question is “whether another person that also benefits from the work is the employee’s joint employer.” Vertical joint employment may arise with staffing agencies and their business clients, or contractors and subcontractors, for example.
    
2. “Horizontal” joint employment - an employee works separate hours for two or more related entities during a workweek, but the entities jointly control the employee’s work. If the entities are joint employers, then the hours worked by this employee must be combined when calculating the number of hours worked in a workweek for overtime purposes.

Joint employer status is not just a classification issue; it is a liability issue. If two entities are found to be joint employers, each can be held responsible for wage and hour violations, including unpaid wages and overtime. As a practical matter, this means that a business working with a staffing company or contractor could be on the hook for wage violations even if it did not directly employ the worker.

Vertical Joint Employment

The proposed rule adopts a four-factor test to analyze a potential vertical joint employment relationship. The analysis includes whether the potential joint employer:

1. Hires or fires the employee;
    
2. Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
    
3. Determines the employee’s rate and method of payment; and
    
4. Maintains the employee’s employment records. (Records related to compliance with the entities’ contractual agreement are not considered employment records for this purpose.)

This is the same four-factor test adopted by the DOL in its 2020 final rule. There are important substantive differences, however:

• “Reserved control” may be considered, but the entity’s actual exercise of control is more determinative in analyzing joint employer status. The 2020 rule required that a potential joint employer actually exercises control over the employees — reserved or contractual control was not a factor in the analysis.
   
• Factors evaluating a worker’s economic dependence on the joint employer are not categorically excluded from the analysis, but they carry less weight. The 2020 rule provided that “no factors should be used to assess economic dependence,” a provision that the district court had rejected.
   
• Additional factors may be relevant, but these four factors carry more weight. (The 2020 rule allowed for consideration of additional factors only to the extent they reflected an employer’s exercise of “significant control over the terms and conditions of the employee’s work.”)

If the four factors unanimously point to a finding of a joint employment relationship, then there is a “substantial likelihood” that the entity in question is a joint employer. Conversely, if the four factors all indicate there is not a joint employment relationship, there is a substantial likelihood the entity is not a joint employer.

In addition, the proposed rule expressly excludes from the analysis factors that are relevant only in evaluating independent contractor status. These include:

• Whether the job requires special skills and initiative; 
   
• Whether the worker has the opportunity for profit or loss based on managerial skill; and 
   
• Whether the employee invests in required equipment.

These factors are not new, but the manner in which they are applied is. The DOL makes clear that both actual control and the right to control may be relevant, and that no single factor is dispositive.

Significantly, the proposed rule reintroduces reserved control into the analysis. This means that contractual rights (the ability to direct work, approve pay rates, or influence employment decisions) may be considered even if they are not actually exercised. For potential joint employers, this places a greater emphasis on how relationships are structured on paper, not just how they operate on a day-to-day basis.

Horizontal Joint Employment

Two entities may be horizontal joint employers if they are “sufficiently associated with respect to the employment of the employee.”

Employers will be considered sufficiently associated, the rule states, if:

1. There is an arrangement between them to share the employee’s services;
    
2. One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
    
3. 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. Such a determination depends on all of the facts and circumstances.

Certain business relationships between the entities (such as being a franchisee of the same franchisor) will not be enough to establish joint employment, the DOL explained. If the nature of the business relationship between the two entities has no connection with respect to the specific worker, then that relationship is not a factor in determining horizontal joint employment.

Irrelevant Business Models and Practices

Finally, the proposed rule expressly excludes certain common business models and practices as irrelevant to the joint employment analysis:

• Certain contractual agreements related to health, safety, or legal compliance, including anti-harassment policies, background checks, and workplace safety protocols.
   
• Providing a sample employee handbook or other forms to another employer.
   
• Offering an association health or retirement plan to another employer or participating in such a plan with the employer.
   
• Jointly participating in an apprenticeship program with another employer.
   
• Operating as a franchisor or entering into a brand and supply agreement, or using a similar business model; and
   
• Providing quality control standards to ensure the consistent quality of the work product, brand, or business reputation.

An employer’s practice of allowing another employer to operate on its premises (including “store within store” arrangements) was excluded from consideration under the 2020 rule. This exclusion does not appear in the current proposed rule.

Removing these practices from the analysis gives employers more latitude to ensure legal compliance and quality standards, maintain brand integrity, and provide benefits and training to workers without incurring potential joint employer liability.

Takeaway

The differences between the proposed joint employer rule and the 2020 rule reflect the DOL’s clear consideration of the federal court’s objections in vacating key elements of the earlier rule. Nonetheless, the proposed rule offers a narrower interpretation of joint employment than the expansive view embraced under the Obama Administration in 2016. (The Obama DOL’s Administrator’s Interpretation on joint employment sought to head off perceived wage and hour violations arising from what the agency termed the “fissured workplace.” The first Trump Administration rescinded that subregulatory guidance and removed it from the DOL website).

The proposed rule signals a return to a broader, more flexible standard for joint employment, focusing on practical realities over formal labels. If finalized, the rule would serve as interpretive guidance not binding on courts. The various joint employer analyses adopted by the federal courts of appeals will remain in effect. Moreover, as with its 2020 iteration, a final rule is likely to face court challenges. Employers also must continue to follow potentially more stringent or otherwise different standards that may apply under state law.

Employers that rely on staffing agencies, subcontractors, or multi-entity structures should expect increased scrutiny. The safest approach is to assume that shared control, whether exercises or merely reserved, will create exposure. Employers should reveal their contracts, operational practices, and internal decision-making to ensure that responsibility for workers is clearly defined and consistently applied.

Please contact a Jackson Lewis attorney if you have questions about the proposed rule and its potential application to our business.