One Standard to Rule Them All: DOL Proposes Nationwide Joint Employer Status
On April 23, 2026, the U.S. Department of Labor’s (“DOL”) Wage and Hour Division published a Notice of Proposed Rulemaking to establish a single, nationwide standard for determining joint employer status under three major federal wage and hour laws: the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (“FMLA”), and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). This proposed rule is the DOL’s first regulatory guidance on joint employer status since the Biden administration rescinded the prior rule in July 2021.
WHY THIS MATTERS
The concept of joint employer status is significant because when two or more employers are found to be joint employers, they are jointly and severally liable for wage violations—including unpaid minimum wages, overtime premiums, and other statutory obligations—owed to the employee. This is exceedingly important in business models such as:
- Franchise relationships
- Staffing agency and temp worker arrangements
- Subcontracting and independent contractor arrangements
- Shared workforce agreements in healthcare, construction, and agriculture
Since the 2021 rescission of the prior rule, the absence of a governing federal standard created uncertainty. DOL investigators were left to apply varying tests that differ across federal circuit courts, increasing compliance burdens and litigation risk for employers operating in multiple jurisdictions.
WHAT THE RULE IS PROPOSING
The proposed framework draws on commonalities in federal court precedent and seeks to resolve significant circuit court splits. Key components of the proposed rule change include:
1. Vertical Joint Employment – Four-Factor Test
The proposed rule seeks to establish a four-factor test examining whether the potential joint employer (1) has the power to hire or fire 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) whether the potential joint employer maintains the employee’s employment records. Importantly, the proposed rule recognizes that no single factor is dispositive. The proposed rule also provides that if all four factors unanimously point in the same direction—either toward or against joint employer status, there is a substantial likelihood that the indicated outcome is correct. Furthermore, the proposed rule clarifies that a potential joint employer exercises indirect control through mandatory directions to another employer. Similarly, business decisions that only incidentally affect employees of another employer will not give rise to joint employer status.
2. Horizontal Joint Employment
The proposed rule advises that horizontal joint employment occurs when an employee works for two or more separate employers in the same workweek and those employers are “sufficiently associated” with each other such that the employee’s hours must be aggregated for FLSA overtime purposes. Mere shared business relationships—such as being franchisees of the same franchisor—are not sufficient alone to establish horizontal joint employment.
3. Clarification for Common Business Arrangements
The proposed rule expressly provides that certain routine business practices do not, standing alone, establish joint employer status. These include franchisor brand requirements, compliance with general legal obligations, and adherence to health and safety standards. This provides clarity to franchisors and businesses operating through contractor or staffing relationships.
4. Alignment between FLSA, FMLA and MSPA
The proposed rule would also amend existing FMLA and MSPA regulations to align the joint employer analysis under those statutes with the proposed FLSA standard.
WHAT THIS MEANS FOR EMPLOYERS
The proposed rule, if finalized, would affect a broad range of employers by providing much-needed clarity and a framework generally considered more employer-friendly than certain recent circuit court approaches. While the rule mandates the standard for DOL enforcement and audits, employers should note that federal courts are not strictly bound by it; they retain ultimate authority to interpret the statute independently, though they may find the rule's logic persuasive in litigation. State law standards remain separately applicable and may impose broader liability.
The proposed rule is subject to a 60-day public comment period closing at 11:59 p.m. EDT on June 22, 2026. Businesses that may be affected by this rule should consider submitting comments addressing the proposal’s operational, compliance, and litigation implications.
Comments may be submitted through here. The full proposed rule is available here.
Panza Maurer & Maynard will continue monitoring these developments and will provide further updates if the DOL announces any changes to the proposed rule. If you would like assistance in preparing comments or exploring how these changes can affect your business, please contact our Labor & Employment team.