On April 22, 2026, the Wage and Hour Division of the United States Department of Labor (DOL) released a proposed rule titled “Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act,” which seeks to clarify when multiple employers may be held jointly liable under the Fair Labor Standards Act (FLSA). By way of this proposed rule, the DOL also proposes that joint employer status under the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), federal statutes also enforced by the DOL’s Wage and Hour Division, be determined using the department’s FLSA analysis, as both the FMLA and the MSPA incorporate the FLSA’s employment definitions.

The FLSA governs payment of wages, including overtime, owed to employees by employers. The FMLA governs an employer’s obligations to employees for protected leave and job reinstatement. The MSPA provides employment and wage protections for most agricultural employees. Acting Labor Secretary Keith Sonderling confirmed that the proposed rule reflects the current administration’s commitment to “simplifying compliance for American employers and strengthening protections to put American workers first” while Andrew Rogers, Wage and Hour Division Administrator stated that the proposed rule would “deliver much-needed regulatory clarity in the face of divergent judicial precedent throughout federal courts of appeals.”

This proposed rule should not be confused with the February 26, 2026, Final Joint-Employer Rule issued by the National Labor Relations Board, which only applies to the National Labor Relations Act.

History of the Joint Employer Concept

The FLSA was enacted in 1938, and requires, among other things, that covered employers pay their non-exempt employees at least the federal minimum wage for every hour worked and overtime pay for every hour worked in excess of 40 hours in a workweek. A year later, the Wage and Hour Division issued Interpretive Bulletin Number 13, which addressed whether two or more companies could be jointly and severally liable for an employee’s hours worked under the FLSA, acknowledging the existence of what we now commonly refer to as “joint employer liability.” The Bulletin provided examples of the two joint employer liability concepts that still exist today: “vertical” joint employment and “horizontal” joint employment.

Vertical Joint Employment

According to the DOL, “vertical” joint employment exists when an employee is employed by two or more employers that simultaneously benefit from the employee’s work. In a vertical joint employment situation, the employee typically works one set of hours and there is no question that the employee has at least one employer for the work; but the question arises whether another company that also benefits from the work is the employee’s joint employer. Vertical joint employment arises most commonly in business structures involving contractors and subcontractors or staffing agencies and their clients.

Horizontal Joint Employment

“Horizontal” joint employment generally involves situations in which an employee works separate hours for two or more joint employers in the same workweek and the employers are “sufficiently associated with each other with respect to the employment of the employees” that they are joint employers. The DOL explains that in a typical horizontal joint employer situation, “it is undisputed that each employer employs the employee for some hours worked, and the issue becomes whether the employers are sufficiently associated with each other with respect to the employment of the employee.” When horizontal joint employment exists, the employee’s total hours worked in the workweek for each of the employers is aggregated for purposes of FLSA compliance, and each employer is jointly liable for the employee’s wages, including overtime premiums that are owed based on the aggregated hours worked. The proposed rule deems employers to be “sufficiently associated” when:

1. There is an arrangement between the employers to share the employee’s services;
2. One employer is acting directly or indirectly in the interest of the other in relation to the employee; or
3. The employers 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.

In January 2020, the DOL issued a joint-employer rule that was ultimately rescinded by the Biden administration in its entirety the following year as a result of a decision rendered by the United States District Court for the Southern District of New York, vacating most of the January 2020 final rule, finding that the sections of the January 2020 joint-employer final rule related to vertical joint employment were unlawful. The current proposed rule, while similar to the 2020 rule, aims to establish a clear standard for determining when multiple employers are jointly liable for wage and hour violations, filling a regulatory gap that has existed since the DOL’s 2020 rule was rescinded in July 2021, and if implemented, would define joint employer status across the FLSA, the FMLA, and the MSPA. According to the DOL, the rule is intended to resolve circuit splits among federal courts of appeals, streamline employer compliance, and strengthen worker protections by ensuring that employees receive all wages owed and benefits to which they are entitled, even when one employer is unable or unwilling to pay or provide.

Proposed Rule Four Factor Test

The proposed rule sets forth a four-factor test to determine whether a person/entity is a joint employer. These factors include whether the person/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.

Like the prior 2020 rule, the proposed rule provides that a potential joint employer’s ability, power, or reserved right to act in relation to the employee is relevant for determining joint employer status. However, unlike the now rescinded 2020 rule, the proposed rule does not require that a potential joint employer actually exercise such control in order to be deemed a joint employer. This difference notwithstanding, the proposed rule makes it clear that actual exercise of such control is more relevant than just the existence of such ability, power, or right.

The proposed rule also provides specific examples of what will not, standing alone, make joint employer status more or less likely, including but not limited to: compliance with legal obligations and/or health and safety standards (i.e., requiring anti-harassment policies or background checks, establishing workplace safety practices, and providing related training) through a contract; offering an association health plan; participating in a joint apprenticeship program; operating as a franchisor; and imposing quality control standards (i.e., specifications related to scope of work, quantity standards, deadlines, and morality clauses) to protect brand reputation. These examples should give companies operating through Professional Employer Organizations such as staffing agencies, subcontractors, and franchisees, some comfort in knowing that routine brand protection and compliance coordination won’t automatically result in their being deemed a joint employer.

According to the DOL, the benefits of implementing the proposed rule include reduced compliance costs, reduced litigation costs, improved enforcement of wage and hour laws, and improved worker awareness of available rights and remedies.

The proposed rule is open for public comment through June 22, 2026. Employers are encouraged to review the full text of the proposed rule and consider submitting comments during the notice and comment period.

For questions regarding this proposed rule, including your opportunity to submit a comment within the public comment period, please reach out to Maureen A. Maffei or any other member of Ice Miller’s Workplace Solutions team.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.