On April 22, 2026, the United States Department of Labor (“DOL”) announced its new proposed rule aimed at clarifying when multiple employers share joint liability for violations of federal wage and hour laws. The proposed rule is entitled “Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act.”[1]
KEY TAKEAWAYS
The proposed rule seeks to create a unified standard for joint liability across the FLSA, FMLA, and MSPA. Unlike the DOL’s current rule, the proposed rule does not require that a potential joint employer “actually exercise control” to be considered a joint employer. The proposed rule sets forth joint employment standards under both “horizontal” and “vertical” employment arrangements, including a four-factor test to determine if vertical joint employment exists and clear examples of horizontal joint employment as explained below.
HORIZONTAL JOINT EMPLOYMENT
“Horizontal” joint employment exists when an employee works for two or more employers in the same workweek and when those employers are “sufficiently associated” regarding the employee’s work. The proposed rule lists three criteria, any one of which can demonstrate sufficient association: (1) There is an arrangement between the employers to share the employee’s services; (2) One employer is acting directly or indirectly in the interests of the other with respect to the employee; or (3) The employers share control of the employee, directly or indirectly, through ownership or common control.
Routine business relationships that do not relate to more than one employer employing a specific worker do not establish horizontal joint employment. For example, two businesses that merely share the same vendor, or two franchisees that have the same franchisor, are not joint employers solely because of those arrangements. On the other hand, the DOL guidance provides that there is horizontal joint employment when a restaurant and a member’s club in the same hotel share staff, managers, and a kitchen.
VERTICAL JOINT EMPLOYMENT
Vertical joint employment exists under the proposed rule when a worker has a direct employment relationship with one employer but is controlled by another (the “potential joint employer”). the proposed rule sets forth a four-factor analysis to determine whether the potential joint employer is, in fact, a joint employer: Whether the potential joint employer (1) hires or fires the employee; (2) substantially supervises and controls the employee’s schedule or conditions; (3) determines the employee’s rate and method of pay; and (4) maintains the worker’s employment records.
If these four factors all point to the same conclusion, there is a “substantial likelihood” that there is or is not joint employment. The proposed rule makes no single factor dispositive, and the totality of the circumstances governs the determination of joint employment. Additional factors may also be relevant for consideration. The DOL provided an example of vertical joint employment where a packaging company closely supervises and controls the schedules of workers supplied by a staffing agency.
FACTORS THE DOL DOES NOT CONSIDER
The proposed rule also identifies factors that the DOL will exclude whendetermining joint employment. The DOL proposes excluding consideration of factors that are relevant only when used to assess whether a worker is an independent contractor or employee. These include (1) whether the employee is in a job that otherwise requires special skill, initiative, judgment, or foresight; (2) whether the employee has the opportunity for profit or loss based on his or her managerial skill; and (3) whether the employee invests in equipment or materials required for work or the employment of helpers. The proposed rule also excludes consideration of six business models or practices when evaluating whether joint employment exists.[2]
INTERACTION WITH STATE LAW
Many states have their own joint employment doctrines and, while the proposed rule seeks to harmonize the approach across three federal statutes, its interaction with state law, if adopted, remains unclear. For example, New York law takes a different approach to the joint employer doctrine.
The New York Labor Law (“NYLL”) joint employment test focuses on the “economic reality” of the relationship, with the central question being “whether the alleged employer possessed the power to control the workers in question.” Jin Gang Huang v. Long Hing Kitchen, Inc., 2026 NY Slip Op 01776, at *6 (App. Div. 2d Dep’t Mar. 25, 2026) (citing Herman v. RSR Sec. Servs., Ltd., 172 F.3d 132, 139 (2d Cir. 2013)). Courts apply four mandatory factors when assessing joint employment under the NYLL: Whether the potential joint employer: (1) had the power to hire and fire employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.
Courts applying the NYLL test also can consider six additional factors: (1) whether the entity’s premises and equipment were used for the work; (2) whether the subcontractor had a business that could shift as a unit from one putative joint employer to another; (3) the extent to which the workers performed a discrete line-job integral to the entity’s process of production; (4) whether responsibility under the contracts could pass from one subcontractor to another without material changes; (5) the degree to which the entity supervised the workers’ work; and (6) whether the workers worked exclusively or predominantly for the entity.
Without belaboring the distinctions between the DOL’s proposed rule and the NYLL, it is sufficient for present purposes to note that they are different tests that use different factors. Accordingly, if the proposed rule is adopted, the potential exists for a court to find a joint employer relationship for an employee under one test but not under the other.
IMPLICATIONS OF THE PROPOSED RULE
The proposed rule is subject to a public notice and comment period. Comments must be filed by June 22, 2026. Employers should use this time to assess their workers and staffing arrangements, especially across corporate affiliates. Employers should analyze these arrangements not only under existing federal law, but under the DOL’s proposed rule and applicable state law as well.
[1] The FLSA, FMLA and MSPA, respectively.
[2] The six business models or practices are: (1) using or establishing an association health plan or association retirement plan with other businesses; (2) providing a sample employee handbook, or other forms, to another business; (3) jointly participating with another business in an apprenticeship program; (4) operating as a franchisor or entering into a brand and supply agreement; (5) contractual provisions with other businesses, such as requiring workplace safety practices, antiharassment policies, or other measures intended to encourage compliance with the law; and (6) quality control standards to ensure consistency across work product, brand, or business reputation.
