Publication
DOL Proposes a Unified Standard for Joint Employer Status Under Three Federal Laws
By Brook Barnes, Kevin Brown, and Alex Kat
On April 22, 2026, the U.S. Department of Labor’s Wage and Hour Division published a proposed rule to clarify joint employer status under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The proposed rule would establish a single, nationwide standard for determining when two or more employers are jointly responsible for an employee’s wages, benefits, and other employment protections.
Why One Rule?
Since rescinding its prior FLSA joint employer regulation in July 2021, the Department has lacked any regulatory guidance addressing joint employer status under the FLSA. The absence of a governing standard created a fragmented landscape, forcing the Department’s own investigators to apply judicial standards that vary from circuit to circuit across the federal courts. Meanwhile, the FMLA and MSPA regulations continued to articulate their own distinct joint employer standards, despite both statutes incorporating the FLSA’s statutory definitions of “employ” and “employee.”
The Department’s objectives are to reduce compliance and litigation costs, improve enforcement consistency, promote greater uniformity among court decisions, and help workers better understand their rights. As Acting Secretary of Labor Keith Sonderling said, “[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.”
What Does the Proposed Rule Do?
The proposed rule tackles two recognized forms of joint employment: “vertical” and “horizontal” joint employment.
Vertical Joint Employment. Vertical joint employment arises when an employee is jointly employed by two or more employers that simultaneously benefit from the employee’s work. Typically, the employee works one set of hours and has an undisputed employer; the question is whether another entity, such as a general contractor or staffing agency client, is also an employer of that worker.
The centerpiece of the proposed rule lies in the four-factor test for vertical joint employment. Those factors are whether the potential joint employer: (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. No single factor is dispositive, and classification depends on an assessment of all the facts in a particular case. Nevertheless, the proposed rule introduces an important bright-line principle: all four factors unanimously pointing to one result demonstrates a “substantial likelihood” that the outcome is correct, and additional factors are highly unlikely to outweigh them.
The proposed rule also clarifies several important interpretive principles around these factors:
- Reserved control is relevant but less probative. A potential joint employer’s contractual authority to act is relevant, but actual exercise of control carries more weight; a contractual right to supervise or fire employees that is never exercised in practice is less indicative of joint employment than actions taken.
- Indirect control counts, but mere recommendations do not. Indirect control exists when a potential joint employer issues mandatory directions to an intermediary employer regarding the employee. However, a request, recommendation, or suggestion is not indirect control even if granted.
- Additional factors may be considered. Beyond the four primary factors, additional considerations—including whether the employee has a continuous or repeated relationship with the potential joint employer or works at a location the potential joint employer owns or controls—may be relevant, but carry less weight than the four primary factors.
- Economic dependence is not categorically excluded. The proposed rule does not categorically bar consideration of factors relating to economic dependence; however, it treats such factors as generally less relevant than the four primary factors and cautions that they need not be considered in every case.
Horizontal Joint Employment. Horizontal joint employment, by contrast, involves an employee who works separate hours for two or more employers in the same workweek. The question in this scenario is whether the employers are “sufficiently associated” with each other such that the employee’s hours must be aggregated for FLSA compliance purposes. Independent business relationships unrelated to employment, such as sharing a vendor or being franchisees of the same franchisor, are alone insufficient to establish horizontal joint employment.
Safe Harbors for Common Business Practices
Perhaps the most welcome portion of the proposed rule, particularly for those employers operating through franchise, staffing, or subcontracting arrangements, is the “safe harbor” guidance. The proposed rule identifies several business models and practices that, standing alone, do not make joint employer status more or less likely. These include:
- Franchising and similar business models. Operating as a franchisor, entering into a brand-and-supply agreement, or using a similar business model does not by itself affect the joint employment analysis. This is not a categorical exemption; a franchisor that exercises day-to-day control over a franchisee’s employees could still be found to be a joint employer, but the franchise relationship alone is neutral.
- Legal compliance and safety requirements. Contractual provisions requiring compliance with general legal obligations, anti-harassment policies, background checks, or workplace safety measures do not indicate joint employer status.
- Quality control and brand standards. Requiring adherence to quality control standards — such as specifications on work scope, deadlines, or use of standardized products — does not make joint employer status more or less likely.
- Common business practices. Normal activities such as providing a sample employee handbook, offering an association health or retirement plan, or jointly participating in an apprenticeship program do not indicate joint employment.
Why Does It Matter?
When a joint employment relationship exists, all joint employers are jointly and severally liable for failing to comply with all applicable provisions of the FLSA, including wage shortfalls, damages, and penalties owed to the employee for all hours worked in a given workweek. This means that each joint employer is fully responsible for the entire amount of minimum wages and overtime pay due to the employee, and if one joint employer is unable or unwilling to pay, the others are responsible for the full amount owed. Under the MSPA, each joint employer must ensure employees receive all applicable employment-related protections, including accurate disclosure of terms and conditions of employment, written payroll records, and timely payment of wages. Under the FMLA, employees who are jointly employed must be counted by all joint employers in determining employer coverage and employee eligibility, though only the “primary employer” bears responsibility for providing FMLA leave and maintaining health benefits.
What Should Employers Do Now?
Employers, particularly those in industries with multi-tiered business relationships such as staffing, franchising, construction, agriculture, and hospitality, should consider reviewing the proposed rule and assessing how their existing arrangements may be affected.
The Department encourages all interested parties to submit comments on the proposed rule. The 60-day comment period, which provides an opportunity for stakeholders to submit written data, views, or arguments to shape the final rule, closes at 11:59 p.m. ET on June 22, 2026.
About Snell & Wilmer
Founded in 1938, Snell & Wilmer is a full-service business law firm with more than 500 attorneys practicing in 17 locations throughout the United States and in Mexico, including Phoenix and Tucson, Arizona; Los Angeles, Orange County, Palo Alto and San Diego, California; Denver, Colorado; Washington, D.C.; Boise, Idaho; Las Vegas and Reno-Tahoe, Nevada; Albuquerque, New Mexico; Portland, Oregon; Dallas, Texas; Salt Lake City, Utah; Seattle, Washington; and Los Cabos, Mexico. The firm represents clients ranging from large, publicly traded corporations to small businesses, individuals and entrepreneurs. For more information, visit swlaw.com.
