DOL Proposes New Joint Employer Rule

Summary

On April 22, 2026, the U.S. Department of Labor (“DOL”) proposed a four-part test for determining whether a person or entity may be held liable as a “joint employer” for violations of the federal Fair Labor Standards Act (“FLSA”), as well as the Family Medical Leave Act (“FMLA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). The proposed rule revisits the DOL’s 2020 Rule, which was rescinded in 2021, and makes minor changes to align with interpretations issued by the courts over the past several years.

Background

The wage-and-hour provisions of the FLSA require covered employers to pay their employees at least minimum wage, and overtime for every hour worked in excess of 40 hours per workweek.[1] The FMLA generally requires employers to restore an employee to an equivalent position after they take unpaid leave for family and medical reasons.[2] The MSPA protects the employment rights of migrant and seasonal workers.[3] Both the FMLA and MSPA adopt the FLSA’s definition of “employ.”[4] The FLSA’s Sections 3(d), (e), and (g) define “employer,” “employee,” and “employ,” respectively.

In 1939, one year after the FLSA was enacted, the DOL issued Interpretative Bulletin No. 13, which recognized that two or more employers may be jointly and severally liable for violating the wage-and-hour provisions of the FLSA.[5] The FLSA itself did not define “joint employer” or “joint employment.” The DOL proposed a four-part test for determining joint employer status under the FLSA in 2019, adopting a final rule in 2020.[6] For further discussion of the proposed rule that was adopted, and additional background regarding the status of the joint employer standard before 2020, please see our memorandum on the proposed 2019 rule here.

On September 8, 2020, the United States District Court for the Southern District of New York found that the 2020 Rule violated the Administrative Procedure Act and was arbitrary and capricious.[7] The court held that the 2020 Rule conflicted with the FLSA, departed from prior interpretations, conflicted with MSPA regulations, and did not consider its cost to workers.[8] In July 2021, the Department rescinded the 2020 Rule as not supported by the FLSA or Congressional intent.[9] In October 2021, the Second Circuit dismissed the Department and Intervenors’ appeal and vacated the district court’s order.[10]

In February 2026, the National Labor Relations Board (“NLRB”) issued a final rule for determining joint employer status under the National Labor Relations Act. Our post on the NLRB 2026 Rule can be found here.

The DOL’s New Proposed Rule

The DOL’s newly announced proposed rule would cover both “vertical” and “horizontal” joint employment under the FLSA. For vertical joint employment—where the employee works for one employer but another person benefits from the work as an employer as well—the DOL proposes reinstating a four-part test similar to the 2020 Rule to determine whether liability could be imposed jointly for violations of the FLSA.[11] The four factors mirror the 2020 Rule and are “whether the other person or entity: (1) hires or fires 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) maintains the employee’s employment records.”[12]

The DOL stated these four factors “weigh the economic reality of the potential joint employer’s control, direct or indirect, over the employee and would provide needed clarity and uniformity to the determination.”[13] According to the DOL, these factors align with the standards the Supreme Court found to be dispositive in Falk v. Brennan, 414 U.S. 190 (1973), and the Bonnette test from Bonnette v. California Health and Welfare Agency, 704 F.2d 1465 (9th Cir. 1983), abrogated on other grounds by Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528 (1985).[14] Similar to the 2020 Rule, the DOL deviates from the Bonnette test’s first factor, choosing instead to focus on the economic reality, which the DOL clarified is consistent with the approach taken by various courts.[15] Similarly, the DOL proposed adding “to a substantial degree” to the second factor to reflect the holding in Falk, and to recognize there is not often a binary between absolute control and no supervision.[16] The proposed rule also provides guidance that “[n]o single factor is dispositive in determining joint employer status under the FLSA, as the determination will depend on all of the facts in a particular case.”[17]

Beyond these four factors, the DOL has clarified that additional factors may be relevant for vertical joint employment in some cases.[18] Two examples provided by the proposed rule of additional factors that may indicate joint employment are situations in which: the joint employer “continuously or repeatedly benefits from the employee’s work,” or “if the employee works at a location or facility that is owned or controlled by the potential joint employer.”[19] The 2020 Rule had allowed for the consideration of additional factors only when they indicated control over the employee.[20] No such limitation is proposed in the new rule.

In another deviation from the 2020 Rule, the DOL does not propose excluding any factors because they “may assess or relate to economic dependence on an employer for work.”[21] The proposal does list factors that are not relevant: “(1) whether the employee is in a job that 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.”[22] The DOL further explained these factors are irrelevant because they are not probative of whether an employee has a joint employer, and not because they relate to economic dependence.[23]

The 2020 Rule stated that FLSA Section 3(d) was the only relevant statutory basis for analyzing joint employer status. In the new proposed rule, the DOL clarified the proposal does not limit the analysis to Section 3(d), recognizing that definitions of “employer,” “employee,” and “employ” within Sections 3(d), (e), and (g) of the FLSA are all relevant.[24]

For horizontal joint employment—where an employee works for multiple employers in the same workweek that are sufficiently associated with one another—the DOL identified three situations in which employers “will generally be sufficiently associated: (1) there is an arrangement between them 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.”[25]

The DOL explained that three common business practices—(1) “Franchising, Brand-and-Supply Agreements, and Similar Business Models,” (2) “Compliance With Legal Obligations or Health and Safety Standards,” and (3) “Quality Control and Brand Reputation Standards”[26]—do not categorically make joint employer status more or less likely.

The proposed rule would also revise the FMLA and MSPA regulations that are inconsistent with the proposed FLSA analysis for determining joint employer status.[27]

Implications

The public comment period for the proposed rule is scheduled to end on June 22, 2026.[28] If adopted, the 2026 Rule would bring clarity and uniformity to the enforcement of federal wage-and-hour laws. That being said, employers will still need to ensure compliance with applicable state laws, which may differ from—and be broader than—the new proposed federal standard.