The DOL’s Proposed Joint Employer Rule Puts Shared Workforce Models on Notice
On April 22, 2026, the U.S. Department of Labor announced a proposed rule that would establish a unified federal standard for joint employer status under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act.
For businesses that rely on staffing agencies, subcontractors, franchise relationships, management companies, shared services, or employees who move across related entities, the proposal deserves immediate attention. Joint employment is the point where ordinary business structures can create extraordinary employment-law exposure. The comment period closes June 22, 2026.
Why the DOL Is Acting
Since the 2021 rescission of the prior joint employer rule, employers have been operating in a fractured legal landscape. Courts have applied different formulations. DOL enforcement has had to navigate circuit-by-circuit variation. Multi-state employers have been left to structure workforce relationships under standards that are related, but far from uniform.
The proposed rule is the DOL’s attempt to bring order to that framework. It would restore Part 791 of the DOL’s FLSA regulations and create a single analytical standard for determining joint employer status under the FLSA, FMLA, and MSPA. For employers, uniformity may be welcome. The harder question is what that uniform standard will capture.
What the Proposal Does
The proposed rule preserves the two familiar categories of joint employment:
- Horizontal joint employment: One employee, two or more related employers, and work performed in the same workweek. This issue can arise among affiliated entities, commonly managed businesses, or companies that share employees across operations.
- Vertical joint employment: One employee formally employed by one entity, but performing work that also benefits another. This is the classic staffing agency, subcontractor, vendor, or franchise-adjacent fact pattern.
Horizontal Joint Employment
For horizontal joint employment, the proposed rule restores the longstanding standard from the Department’s 1958 regulations. The core question is whether the two employers are “completely disassociated” with respect to the employee’s employment. If they are, each can disregard the hours worked for the other. If they are not, if they are “sufficiently associated,” meaning they are joint employers and must aggregate the employee’s hours across both for purposes of FLSA compliance, including overtime. Proposed § 791.120 identifies three situations in which employers will generally be found sufficiently associated: where they have an arrangement to share the employee’s services; where one is acting directly or indirectly in the interest of the other with respect to the employee; or where they share control of the employee by reason of common ownership or control. Ordinary business relationships, sharing a vendor, or being co-franchisees of the same franchisor, are not enough on their own.
Vertical Joint Employment
For vertical joint employment, the DOL proposes a four-factor analysis focused on whether the potential joint employer:
- Hires or fires the employee
- Supervises and controls the employees schedule or conditions of employment to a substantial degree
- Determines the employee’s rate and payment method
- Maintains employment records
The proposal also leaves room for other facts to matter. Reserved control may be relevant, though less probative than control exercised. Indirect control may also be considered. Employers should not assume that careful contract drafting alone will control the analysis if day-to-day operations point in another direction.
The Exposure
The consequence of joint employment is joint and several liability. If a joint employment relationship exists under applicable law, each joint employer can be fully responsible for unpaid minimum wages, overtime, liquidated damages, and related relief. The fact that one entity handled payroll does not necessarily protect the other. Nor does a staffing agreement or vendor contract, standing alone, end the inquiry.
This is where joint employer risk often becomes most serious. The exposure usually lives in the gap between legal form and operational reality. A contract may describe one company as the employer. The workplace may tell a more complicated story.
The FMLA alignment also deserves attention. By tying the FMLA joint employment analysis to the FLSA framework, the proposal may cause wage-and-hour relationships to carry leave-law consequences. That can affect employee counting, coverage, eligibility, restoration rights, and the allocation of primary and secondary employer responsibilities. Employers that have historically analyzed FLSA and FMLA issues separately should revisit that approach.
What Employers Should Be Doing Now
Employers should start by mapping their workforce relationships. Identify every arrangement where workers are supplied by, shared with, supervised by, or operationally integrated with another entity. Then look closely at who controls scheduling, supervision, discipline, hiring, firing, pay rates, work conditions, and employment records.
Next, review the contracts. Staffing agreements, subcontractor agreements, franchise documents, management services agreements, and vendor contracts often contain indemnity provisions, compliance obligations, audit rights, and control language that may matter in litigation or DOL enforcement. Employers should know what those documents say before a dispute arises.
Finally, employers in heavily affected industries should consider submitting comments. Hospitality, construction, agriculture, healthcare staffing, logistics, franchising, and private equity-backed multi-entity platforms all have practical experience that belongs in the rulemaking record. Waiting for the final rule may be easier. Participating now may be more useful.
This remains a proposed rule, and the final version may change. But the direction of travel is clear. The DOL has put shared workforce arrangements, staffing models, franchise systems, and multi-entity operators squarely in view. Employers should use the comment period for what it is: a short window to assess risk, improve documentation, and make their practical concerns part of the rulemaking record. Once the final rule arrives, the question will no longer be how the standard should be written, but whether the business is ready for it.
Levin Ginsburg’s Employment and Benefits group is here to assist employers through potential changes from the new rule. Get in touch with one of our attorney’s and we’ll be happy to help make sure you’re prepared.
