The Joint Employer Is Back (Again): DOL Proposes New (or is that Old?) Rule

Here we go again on the roller coaster that is the joint employer rule.

The U.S. Department of Labor published a new proposed rule this week that would revise the standard for determining when two or more businesses are “joint employers” under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. The proposed rule, published in the Federal Register on April 23, 2026, is open for a 60-day public comment period.

What Is the Proposed Rule?

The DOL’s proposed rule would restore regulatory guidance on joint employer status that existed before the agency rescinded its prior joint employer regulation in July 2021. Since that rescission, the Department has had no regulatory guidance on vertical joint employment and has instead been applying whatever standard is consistent with the judicial precedent in each particular case, which varies across the federal circuits. That has created uncertainty for businesses, workers, and courts alike.

The proposed rule retains the familiar four-factor test for vertical joint employment, asking 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 the determination depends on all the facts in a particular case.

The key difference from the Trump administration’s 2020 Rule is that this proposed rule does not require that the potential joint employer actually exercise control. Instead, the proposed rule examines whether the potential joint employer acts “directly or indirectly” with respect to each factor, meaning that reserved or indirect authority over workers may be sufficient even if the potential joint employer is not exercising that authority day to day. Additionally, the new proposal does not categorically exclude economic dependence factors from the analysis, as the 2020 Rule did. In other words, this proposed standard would be broader than the 2020 Rule, making it somewhat easier to find a joint employment relationship in the vertical context.

For horizontal joint employment, the proposed rule largely readopts the longstanding standard from the 2020 Rule, which itself carried forward the approach that had been in place since 1958. The focus remains on whether the employers are sufficiently associated with respect to the employment of the employee.

Why This Matters for Employers

Joint employer status carries real consequences. If two businesses are found to be joint employers under the FLSA, they are jointly and severally liable for wages, overtime, damages, and penalties owed to the employees. An employee’s total hours worked each week for all joint employers must be aggregated to determine overtime eligibility. Under the FMLA, both joint employers must count the employee for purposes of employer coverage and employee eligibility.

This matters most for businesses that use staffing agencies, subcontractors, franchisees, or other third-party arrangements. If you are a staffing agency client, a general contractor, or a franchisor, the question of whether you could be deemed a joint employer of another entity’s workers is one you cannot afford to ignore.

The good news is that the proposed rule reaffirms that merely operating as a franchisor, entering into a brand and supply agreement, or using a similar business model does not, by itself, make joint employer status more or less likely. Similarly, requiring compliance with quality control standards, providing a sample employee handbook, or offering an association health plan does not alone establish joint employment.

Connecticut Considerations

As I have noted in prior posts, Connecticut employers need to be aware that state law may impose different standards. Under the Connecticut Workers’ Compensation Act, when a principal employer procures work through a subcontractor, the work constitutes part or process of the principal employer’s trade or business, and the work is performed on or about premises under the principal employer’s control, the principal employer is liable for workers’ compensation claims for injuries to the subcontractor’s employees. That means employers in Connecticut may face liability under state law in circumstances where the proposed federal joint employer standard would not apply.

Connecticut also applies the ABC test for independent contractor classification, primarily in unemployment insurance and wage and hour contexts, which is a stricter standard than the federal economic reality test. The ABC test addresses a different legal question than joint employer status — whether a worker is an employee or an independent contractor, rather than whether a second entity qualifies as a co-employer — but both issues are relevant for businesses that use staffing agencies and subcontractors, since the classification of the worker must be resolved before joint employer liability can arise. Employers in Connecticut should be evaluating their relationships under both state and federal frameworks simultaneously.

What Should Employers Do Now?

First, this is a proposed rule. It has not been finalized and may change based on public comments. But it is also not a rule you should ignore.

Second, if you use staffing agencies, subcontractors, franchise arrangements, or any other business model in which another entity’s employees perform work that benefits your business, now is the time to review those relationships. Look at how much control you actually exercise over the workers, whether you maintain any of their employment records, and whether you have any role in setting their schedules or pay.

Third, review your contracts. As other commentators have noted, employers should examine their agreements for provisions regarding who controls various aspects of the working relationship, indemnification clauses, and other terms that could become relevant if a joint employer finding is made.

Fourth, consider submitting a comment. The DOL has specifically invited feedback on its proposed framework, including the four factors, the consideration of additional factors, the treatment of economic dependence, and the business practices it has identified as not indicative of joint employment. If this rule will affect your business, now is the time to make your voice heard.

As always, the joint employer issue is one that looks simple on the surface but is anything but. Stay tuned as this rulemaking unfolds.