Executive Summary: On April 22, 2026, the US Department of Labor, through its Wage and Hour Division, issued a Notice of Proposed Rulemaking (NPRM) addressing joint employer status under federal wage and hour and leave laws. The proposal would establish a uniform, more employer-friendly standard across the Fair Labor Standards Act (FLSA), Family Medical Leave Act (FMLA), and Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
History of Joint Employer Definition
In January 2020, the DOL issued a rule defining its interpretation of what makes a “joint employer” under the FLSA. This rule was partially vacated by a federal district court in State of New York v. Scalia, 490 F. Supp. 3d 748 (S.D.N.Y. 2020) for contradicting the FLSA’s broad definitions of “employer,” “employee,” and “employ.” The DOL formally rescinded the rule in July 2021. Since then, the courts have applied varying multi-factor “economic realities” tests, which often lead to inconsistent findings of joint employment status.
Broader Application
To resolve circuit splits and promote clarity and uniformity for employers and employees, the DOL has proposed a rule to define what makes a joint employer under certain situations. This proposed rule largely aligns with the 2020 rule. However, unlike the 2020 rule, which only applied to the FLSA, the 2026 rule proposal would also apply to the FMLA and MSPA.
Proposed Vertical Joint Employment Standard
To determine whether to extend joint employment liability to a person or entity under a theory of vertical joint employment (often applied in staffing agency situations, for example), the proposed rule establishes a four-factor test. Those four factors are whether the other person or entity:
- Hires or fires the employee;
- Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
- Determines the employee’s rate and method of payment; and
- Maintains the employee’s employment records
Under the proposed rule, no single factor is dispositive. Instead, all facts in a particular case should be considered, with the four primary factors carrying the most relevance.
The four-factor test is identical to the 2020 rule. However, while the 2020 rule required a potential joint employer to actually exercise control over these factors, the proposed 2026 rule simply states that actual control is more relevant than “reserved control” (powers not used but retained).
Proposed Horizontal Joint Employment Standard
The proposed rule finds that horizontal joint employment exists when separate employers are sufficiently associated with respect to the employment of the same employee (for example where a nurse works for two different nursing homes owned by the same company). Sufficient association occurs if:
- There is an arrangement between the employers to share the employee’s services;
- One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
- 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.
The DOL “explains that business relationships between two employers that have little to do with their employment of specific workers, such as sharing a vendor or being franchisees of the same franchisor, are not generally probative, and could not alone indicate a sufficient association between the employers to establish that they are joint employers.”
Factors that Are Excluded from Consideration
Under the proposed rule, certain business practices, when standing alone, are insufficient to establish joint employment. These practices include:
- Operating as a franchisor or in a brand-and-supply arrangement, or similar business models
- Contractual provisions requiring compliance with general legal obligations or health and safety standards
- Requiring quality control standards to protect reputations
- Providing sample employee handbooks, association health/retirement plans, or participating in apprenticeship programs.
What’s Next
The proposed rule is subject to a 60-day public comment period, after which the DOL may revise and finalize the regulation. Should the DOL adopt the new rule, the DOL will publish the final rule in the Federal Register. Typically, regulations do not become effective until 30-60 days after publication.
What this Means for Employers
The 2026 Joint Employer Status Proposal is more favorable to the following entities because it reduces the risk of joint liability:
- Franchisors
- General contractors
- Businesses using staffing agencies
When considering whether employers meet the joint employer status under the proposed standards, employers should:
- Reassess control mechanisms in third-party relationships
- Distinguish between quality control and employment control
- Prepare for potential regulatory whiplash depending on future administrations.