New Proposed DOL Rule: A Unified Standard for Joint Employer Status

On April 23, 2026, the U.S. Department of Labor (DOL) published a significant proposed rule aimed at clarifying joint employer status under federal law. Titled “Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act,” the proposal seeks to create a single, consistent standard across these three major statutes.

Currently, determining if two businesses share legal responsibility for the same worker is a complex process that often varies by region due to differing court precedents. The DOL’s new initiative is intended to reduce this uncertainty, lower litigation costs, and ensure that employees receive the wages and benefits they are owed.

Understanding the Two Types of Joint Employment

The proposed rule distinguishes between two types of joint employment, providing a distinct analysis for each:

1. Vertical Joint Employment (The Four-Factor Test): This occurs when an employee is employed by one entity, but another company also benefits from their work, such as in staffing agency or subcontractor relationships. To determine this status, the DOL proposes a four-factor balancing test examining 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.
   • Maintains the employee’s employment records.
     
2. Horizontal Joint Employment (The Three-Factor Test): Horizontal joint employment exists when an employee works separate hours for different employers in the same workweek, such as a cook working at two different restaurants. The core question is whether the employers are “sufficiently associated” with respect to the employee. Under the proposed rule, this association is found if:
   • There is an arrangement between the employers to share the employees’ services.
   • One employer is acting directly or indirectly in the interest of the other in relation to the employee.
   • The employers share control of the employee, either directly or indirectly.

The DOL emphasizes that no single factor is more important than the others. Instead, the determination depends on the specific facts of each case. Additionally, the rule clarifies that standard business practices, such as providing a sample employee handbook or requiring a vendor to follow worker safety laws, do not automatically establish joint employer status.

Why This Matters for Employers

When a joint employment relationship is found, both employers are jointly and severally liable for compliance. This means both parties are responsible for ensuring workers receive minimum wage, overtime pay, and proper leave protections. Under the FMLA, it also means that both employers must count these workers when determining their own coverage and employee eligibility.

Recommended Next Steps for Employers

To prepare for these potential changes, organizations should first evaluate current contracts with staffing agencies and subcontractors to determine the level of control exercised over those workers. It is also important to review internal practices to identify who is responsible for scheduling, setting pay rates and maintaining personnel records for any contracted labor. Finally, employers should consider participating in the regulatory process by submitting public comments to the DOL before the June 22, 2026, deadline to share how these adjustments might impact long-term operations.