Employment Law Update: The DOL’s Proposed “Joint-Employer” Rule
A New Test for Who Counts as the Boss
The New Proposed Rule
The U.S. Department of Labor (DOL) has a new idea for an old question: who, exactly, is your boss? In a proposed rule unveiled on April 22, 2026, the DOL would set a single “joint-employer” test for the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant & Seasonal Agricultural Worker Protection Act (MSPA), unlike the 2020 Joint Employer Rule. The DOL aims to provide employers with a consistent understanding of when multiple employers are jointly responsible for protecting employee wages, leaves of absence, and other federal rights of an employee. This proposed rule would particularly impact businesses and organizations with contractors, as well as staffing agencies, franchisors, and other business models and platforms with shared oversight and control over workers.
Why It Matters
The stakes are concrete: when a joint employment relationship exists, both employers are jointly and severally liable for any wages, damages, and other relief owed to employees, including paying for all hours the employee worked for all joint employers, overtime pay, back pay, front pay, potentially liquidated damages, and attorneys’ fees and costs.
Horizontal and Vertical Employment Framework
The DOL’s proposed rule draws a bright line between horizontal and vertical employment. Horizontal joint employment looks to whether two or more separate employers are “sufficiently associated” to be deemed a joint employer of an employee. The DOL analyzes the association by considering whether: 1) there is an arrangement 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. Business relationships that have little to do with the employment of specific employees—such as sharing a vendor or being franchisees of the same franchisor—are alone insufficient to establish joint employment.
Vertical joint employment, on the other hand, focuses on whether the employee is performing work that simultaneously benefits two or more entities. Think of a vertically structured industry—prime contractor and subcontractor or franchisor and franchisee. The analysis here centers on whether, as a matter of “economic reality,” the employee is employed by both entities. To make that determination, the DOL analyzes: (1) who hires or fires; (2) who supervises and controls work schedules or working conditions to a substantial degree; (3) who sets pay rate and method of payment; and (4) who maintains the employment records. While additional factors may be relevant in the analysis, unanimity on the above four factors—yes on all, or no on all—would establish a “substantial likelihood” of joint-employment status or not. Exercised, day-to-day control of the worker (e.g., directing shifts, approving time, moving workers between posts) would weigh far more under the proposed rule than merely reserving rights in the contract to exercise control in determining joint employer status.
What Won’t Tip the Scales
Equally notable is what will not tip the scales: common business practices like legal compliance standards (i.e., anti-harassment policies, background checks, workplace safety protocols); operating as a franchisor; quality-control or brand standards; providing a sample employee handbook or other templates to another employer; or apprenticeship partnerships with another employer. Factors for determining independent-contractor status include whether the employee is in a job that otherwise requires special skill; whether the employee has opportunity for profit or loss based on managerial skill; or whether the employee invests in equipment or materials required for work. Those categories are not relevant in assessing whether a worker has joint employers.
Conclusion
The proposed rule aims to bring clarity, but it does not simplify the landscape. State joint-employer standards and state Departments of Labor may reach further than the DOL’s framework to find joint employment, and employers remain bound by those requirements regardless of what the federal rule ultimately provides. The public comment period closes on June 22, 2026, at 11:59 p.m. ET, with comments submitted through www.regulations.gov.
Whether this rule is finalized as proposed, revised, or withdrawn, the joint-employer question will remain a live issue for any business or organization that relies on staffing arrangements, subcontractors, franchise relationships, or other shared-workforce models. Employers in these categories should consult with experienced labor and employment counsel now to assess their exposure, pressure-test their existing arrangements, and determine whether to weigh in during the comment period.
Please contact Whiteford’s Labor and Employment Law team with any questions. Whiteford will continue to monitor this development.
The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.