On April 22, 2026, the U.S. Department of Labor (DOL) issued a proposed rule to clarify when two or more entities may be considered joint employers under three federal laws: the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
For several years, there has been no consistent standard for determining joint employer status under federal wage and hour laws. Courts have applied different tests, making it difficult for businesses to predict where the legal boundaries lie. According to the DOL, the newly proposed rule is intended to restore clarity and resolve existing inconsistencies in how to analyze this issue.
Why Joint Employer Status Matters
In simple terms, joint employment means that more than one business entity can be legally responsible for the same workers. If a business is deemed a joint employer, it will be subject to many of the same legal obligations as the primary employer—even if it did not hire the employee or issue paychecks. When a joint employer relationship exists, the joint employers are jointly and severally liable for wages, damages, and other relief owed to employees.
Because joint employer findings can significantly expand liability, employers should seek guidance in this area and pay close attention to this proposed rule. This is especially important for businesses that use staffing agencies, subcontractors, franchise models, or affiliated entities.
What the Proposed Rule Does
The proposal is intended to provide clear regulatory guidance and establish a standard framework for evaluating joint employer status under the FLSA, FMLA, and MSPA. The proposed rule includes examples of business models and affiliations that may create joint employer relationships, identifies and excludes certain business practices as irrelevant to the analysis, and outlines the compliance obligations and liabilities of joint employers under the three statutes.
The proposal distinguishes between two scenarios: horizontal joint employment and vertical joint employment, and clarifies how joint employer status is analyzed for each.
Horizontal joint employment arises when two or more businesses share a worker. When an employee works separate hours for more than one business in the same workweek, the businesses may be joint employers if they are “sufficiently associated.” Employers may be sufficiently associated if they have an arrangement to share services, act in each other’s interest, or share control through common ownership or management.
Vertical joint employment, the more common scenario, arises when an employee works for one business, but another entity also benefits from that work. In these situations, the focus is on whether the other entity exercises control over key aspects of the employee’s work, including hiring or firing decisions, work schedules or conditions, pay practices, or employment records. The proposed rule emphasizes that no single factor is decisive; instead, the determination depends on the overall reality of the working relationship. Common examples of vertical joint employer relationships include staffing agencies and their clients, subcontractors and general contractors, and franchisors and franchisees.
What the Proposed Rule Does Not Do
The proposed rule would apply only to the FLSA, FMLA, and the MSPA. It does not change joint employer standards under:
- The National Labor Relations Act (NLRA);
- Other federal employment statutes; or
- State wage and hour laws, which may impose different or stricter standards.
What Businesses Should Do Now
The proposed rule is open for public comment until June 22, 2026, and it may undergo changes before being finalized. In the meantime, employers should consider the following actions:
- Review contracts with staffing agencies, contractors, or franchise partners;
- Ensure that day-to-day practices align with contractual language;
- Train managers on appropriate boundaries when overseeing non-employees; and
- Monitor the rulemaking process or consider submitting comments.
If you have questions about how this proposed rule may affect your business or would like assistance reviewing your employment practices, please contact a member of BrownWinick’s Labor & Employment team.
