In an effort to create a unified federal joint employer test, on April 23, 2026, the U.S. Department of Labor (DOL), Wage and Hour Division, issued a Notice of Proposed Rulemaking (NPRM) announcing a single, nationwide joint‑employer standard under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
Joint employer status is an issue of particular concern for employers in industries that rely heavily on third‑party labor arrangements, including manufacturing, logistics, healthcare, hospitality, construction, franchising, and agriculture. Aimed at simplifying compliance, Acting Secretary of Labor Keith Sonderling commented “[t]his proposal helps us deliver on that promise. A clear standard on joint employment would give businesses more confidence to invest in partnerships, help employees understand their rights and make the department’s investigations more efficient.”
The proposed rule addresses two types of joint employment:
- Vertical Joint Employment: A worker formally employed by one entity but controlled by or economically dependent on another. Common examples include staffing agency placements, subcontracting relationships, and certain franchise arrangements.
- Horizontal Joint Employment: A worker employed by two or more “sufficiently associated” employers that jointly control an employee’s work in the same workweek. An example includes work performed for related entities or affiliates with shared operations.
With respect to Vertical Joint Employment, the core of the proposed rule adopts a four‑factor, totality‑of‑the‑circumstances “economic reality” test, which analyzes the degree of the potential joint employer’s:
- Hiring or firing authority
- Supervision and control over work schedules or conditions (to a substantial degree)
- Determination of rate and method of pay
- Maintenance of employment records
No single factor is dispositive. In a departure from the 2020 DOL Joint Employer test – which required actual, direct and substantial control over the employee’s work – the 2026 proposed rule emphasizes actual exercise of control, though reserved/indirect control or the right to control may still be considered. Where these four factors unanimously point toward a company’s control over the work, there would be a “substantial likelihood” that there is a joint employment relationship.
Focusing on actual control over the essential terms and conditions of employment, the proposed rule clarifies certain common business operations that do not, by themselves, automatically establish a joint employer relationship. Examples include:
- Setting or enforcing brand standards in franchisor relationships
- Requiring compliance with legal, safety, or health standards
- Providing training materials, sample policies, or guidance
- Conducting quality control or monitoring contractual performance
The proposed rule provides examples of both Vertical and Horizontal Joint Employment. By way of illustration, Vertical Joint Employment may exist where:
A packaging company requests workers on a daily basis from a staffing agency. Although the staffing agency determines each worker’s hourly rate of pay, the packaging company closely supervises their work, providing hands-on instruction on a regular and routine basis. The packaging company also uses sophisticated analysis of expected customer demand to continuously adjust the number of workers it requests and the specific hours for each worker, sending workers home depending on workload. Under these facts, the packaging company is a joint employer of the staffing agency’s employees because it exercises sufficient control over their terms and conditions of employment by closely supervising their work and controlling their work schedules.
The following example illustrates Horizontal Joint Employment:
An individual works 30 hours per week as a cook at one restaurant establishment, and 15 hours per week as a cook at a different restaurant establishment owned by the same person. Each week, the restaurants coordinate and set the cook’s schedule of hours at each location, and the cook works interchangeably at both restaurants. The restaurants decided together to pay the cook the same hourly rate. Under these facts, the restaurant establishments are joint employers of the cook because they share common ownership, coordinate the cook’s schedule of hours at the restaurants, and jointly decide the cook’s terms and conditions of employment, such as the pay rate. Because the restaurants are sufficiently associated with respect to the cook’s employment, they must aggregate the cook’s hours worked across the two restaurants for purposes of complying with the FLSA.
Why this matters. A finding of joint employment can have significant consequences, including joint and several liability for unpaid wages, overtime, and damages under the FLSA resulting from the aggregation of all hours worked across joint employers for overtime calculations. In addition, under the FMLA, joint employers must count jointly employed workers for coverage and eligibility purposes, though only the “primary employer” in a joint employer relationship is responsible for actually providing FMLA leave.
Comments to the proposed rule are due June 22, 2026, which can be made here. In the meantime, employers should review their contracts and practices regarding staffing agencies, subcontractors, and franchisees to ensure these agencies are complying with the FLSA, FMLA and the MSPA. Companies with affiliates and multiple locations should evaluate recordkeeping, scheduling, and pay practices to capture and aggregate work performed by employees across the business’s operations that could implicate joint‑employer risk.
If you have any questions about the proposed joint employer rule or its potential impact on your business, please reach out to Jill S. Welch or any attorney in Barley Snyder’s Employment Practice Group.
