A New Joint Employer Rule on the Horizon: Understanding the DOL’s Proposal

On April 22, 2026, the U.S. Department of Labor (“DOL”) issued a proposed rule that would establish a comprehensive framework for determining joint employer status under the Fair Labor Standards Act (“FLSA”) and align the joint employer analyses under the Family and Medical Leave Act (“FMLA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”) with that same standard. The proposal would add a new 29 CFR Part 791, consolidating the Department’s interpretations and providing detailed guidance.

A Unified Structure for Joint Employment

Proposed Part 791 organizes joint employment analysis around two distinct scenarios: vertical joint employment and horizontal joint employment. Vertical joint employment arises where an employee works a single set of hours for one employer, but another entity also benefits from the work as an employer, common in staffing, subcontracting, and outsourcing arrangements. Horizontal joint employment, by contrast, applies when an employee works separate hours in the same workweek for two or more employers that are sufficiently associated with each other, requiring aggregation of hours and joint and several liability.

In either scenario, the proposal confirms that joint employers are jointly and severally liable for compliance with the FLSA, including minimum wage and overtime obligations, and that all hours worked in the workweek must be aggregated when joint employment exists.

The Vertical Joint Employment Test

The DOL proposes to reinstate the familiar four‑factor test to help determine joint employment:

• (1) hires or fires the employee;
• (2) supervises or controls the employee’s work schedule or working conditions to a substantial degree;
• (3) determines the employee’s rate or method of payment; or
• (4) maintains the employee’s employment records.

Under the proposed rule, no single factor is dispositive, and the determination depends on the totality of the circumstances. The rule clarifies that relevant “employment records” are those related to actions in hiring, firing, supervision, scheduling, or pay, and that maintaining records alone cannot establish joint employment.

The proposal also provides detailed guidance on how control is evaluated. Both direct and indirect control may be relevant, but indirect control exists only where a potential joint employer issues mandatory directives, not where another employer voluntarily follows requests, suggestions, or recommendations. Reserved or contractual authority may be considered, but actual exercised control carries greater weight.

Certain considerations are expressly excluded from the joint employer analysis, including worker skill, opportunity for profit or loss, and investment in equipment, because those factors relate to employee versus independent‑contractor status rather than joint employment.

Horizontal Joint Employment Clarified

For horizontal joint employment, the proposal largely adopts the Department’s longstanding approach, focusing on the relationship between the employers rather than the nature of the employee’s work. Employers will generally be considered sufficiently associated where they share the employee’s services, act in one another’s interest with respect to the employee, or share control through common ownership or management. Routine business relationships, such as shared vendors or participation in the same franchise system, are insufficient on their own to establish joint employment.

Business Models and Practices That Do Not Create Joint Employment

Proposed 29 CFR § 791.125 clarifies that many common business models and practices do not, standing alone, make joint employer status more or less likely. These include operating as a franchisor, enforcing brand standards or quality‑control requirements, mandating compliance with wage‑and‑hour or safety laws, providing sample employee handbooks or policies, offering association benefit plans, or participating in apprenticeship or training programs. The proposal is intended to reassure businesses that standard contractual and compliance practices do not, without more, create joint employer liability.

Alignment of the FMLA and MSPA

The proposal would also revise the FMLA and MSPA regulations to expressly adopt the same joint employer framework used under the FLSA, replacing outdated and inconsistent regulatory language. The DOL’s stated goal is to provide a single, uniform standard across all three statutes, reducing confusion and promoting consistent outcomes for employers and workers subject to overlapping obligations.

Proposed Rule Departures From the 2020 Joint Employer Rule

The proposed rule departs from the DOL’s 2020 joint employer regulation in several ways. Although both frameworks rely on a four‑factor test for vertical joint employment, the 2020 rule limited the analysis by requiring actual exercise of control, narrowly construing indirect and reserved control, and categorically excluding considerations of economic dependence, restrictions that ultimately contributed to its partial invalidation by a federal court. The current proposal adopts a broader, case‑law‑anchored approach, permitting consideration of direct, indirect, and reserved control (with actual control carrying greater weight), allowing limited consideration of economic realities, and grounding the analysis in the FLSA’s expansive definitions of “employ,” “employee,” and “employer.” Unlike the 2020 rule, the proposal also establishes a comprehensive framework and harmonizes joint employer standards across the FLSA, FMLA, and MSPA.

Key Takeaways for Employers

If finalized, the DOL’s proposed rule would provide a clearer and more structured framework for assessing joint employer risk, while reaffirming that the inquiry remains highly fact-specific. Employers that rely on staffing agencies, subcontractors, franchisees, or other third‑party labor arrangements should begin reviewing both their contractual provisions and actual practices, with particular attention to control over supervision, scheduling, pay, and recordkeeping. Contract terms allocating authority, responsibility, and indemnification may be especially significant if facing a joint employer claim.

For guidance on proactive planning in response to the DOL’s proposed rule, please contact one of Obermayer’s experienced attorneys to assist with evaluating your potential exposure and planning an appropriate course of action.

The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.