The Department of Labor announced, April 22, 2026, a new Proposed Rule on who can be a joint employer under the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Concerns over who may be deemed a joint employer—and thereby liable for the wrongs of either party to the joint employer relationship—typically arise in franchisor/franchisee or contractor/subcontractor relationships. In 2020, the DOL finalized a similar rule, but that rule was rejected by a court. The Proposed Rule attempts to conform to that court’s concerns. It also offers a uniform standard for assessing joint employer status under these three statutes.
This article provides a brief overview of the Proposed Rule’s key provisions and what employers need to know as the Proposed Rule moves through the public comment period.
Link to The Proposed Rules’ Uniform Standards for Defining Horizontal and Vertical Joint Employment The Proposed Rules’ Uniform Standards for Defining Horizontal and Vertical Joint Employment
The Proposed Rule aligns the analysis for determining joint employer status under the FLSA, FMLA, and MSPA. Towards that end, it offers a standardized way to identify when a joint employment relationship exists under two commonly arising joint employment relationships, vertical joint employment and horizontal joint employment.
Under the Proposed Rule, vertical joint employment hinges on the relationship between the potential employer and the employee. The Proposed Rule adopts a familiar four-factor test for determining vertical joint employment:
- Whether the entity hires or fires the employee;
- Whether the entity supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
- Whether the entity determines the employee’s rate of pay and method of payment; and
- Whether the entity maintains the employee’s employment records.
None of the above factors are dispositive, and the Proposed Rule permits consideration of additional factors, such as whether the employee is economically dependent on the potential joint employer for work. However, the Proposed Rule emphasizes that a finding that all or none of the four primary factors are satisfied establishes a substantial likelihood regarding whether or not the entities are joint employers.
Under the Proposed Rule, horizontal joint employment depends on the relationship of the employers, and the analysis focuses on whether they are sufficiently associated with respect to the employee’s employment. The Proposed Rule describes three situations in which employers will generally be deemed sufficiently associated such that they are properly considered joint employers: (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; and (3) they share control of the employee, directly or indirectly, by reason of the fact that one employer controls or is under common control with the other.
Link to Exclusion of Additional Irrelevant Factors Exclusion of Additional Irrelevant Factors
The Proposed Rule lists a number of general common business models and/or practices that do not make joint employer status more or less likely under the analyses discussed above, and therefore—at least in the Department of Labor’s view—should not be considered. These are:
- Certain contractual agreements related to health, safety, or legal compliance, including anti-harassment policies, background checks, and workplace safety protocols;
- Providing a sample employee handbook or other forms to another employer;
- Offering an association health plan or association retirement plan to another employer or participating in such a plan with the employer;
- Jointly participating in an apprenticeship program with another employer;
- Operating as a franchisor or entering into a brand and supply agreement, or using a similar business model; and
- Quality control standards to ensure the consistent quality of the work product, brand, or business reputation.
Link to Next Steps for Employers Next Steps for Employers
The Proposed Rule provides clarity and uniformity as to the joint employer analysis under the FLSA, FMLA, and MSPA. It also excludes certain business practices and models from consideration in this analysis—an update that certain employers, i.e., franchisors, should be enthusiastic to see. However, the Proposed Rule permits consideration of reserved and indirect control and economic dependence, which may subject employers to broader liability. At this juncture, it is too early to tell how courts will respond to the DOL’s view on law once a new rule is actually promulgated.
Employers should review their relationships with contractors, staffing agencies, and business partners and consult with their labor and employment counsel to assess potential joint employer risks and liabilities under the Proposed Rule.
Dykema will continue monitoring this rulemaking process and will provide an update if and when a final rule is issued. If you would like assistance preparing a comment submission or assessing joint employer risk under the proposed framework, contact the authors of this article or any other member of Dykema’s Employment Law Group. Comments are due 60 days after publication in the Federal Register (publication is scheduled for April 23, 2026).