Department of Labor Proposes New Iteration of the Joint Employer Standard

On April 23, 2026, the Wage and Hour Division of the federal Department of Labor (DOL) published a proposed rule on the standard for determining joint employer status under the Fair Labor Standards Act (FLSA), Family Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The proposed rule provides different tests for vertical verses horizontal joint employment. If adopted, joint employer status will be harder to prove returning to the pre-Biden standards and similar to other initiatives by the current Administration. Anyone wishing to comment on this proposed rule has until June 22, 2026.

The DOL has not provided regulatory guidance on determining joint employer status since 2021. The proposal is similar to a now rescinded 2020 final rule made during Trump’s first term and comes two months after the National Labor Relations Board (NLRB) officially reinstated the 2020 pre-Biden joint employer standard.

The proposed rule makes a distinction between vertical and horizontal joint employment and establishes two standards. Some of the other joint employment standards (applied under different laws) use this distinction but not all.

Vertical Joint Employment

Vertical joint employment is where an employee is jointly employed by two or more employers that simultaneously benefit from the employee’s work. For example, two companies arrange to employ a common watchman to protect the property of both companies concurrently for a specified number of hours each night.

The proposed rule creates a four-factor test to determine vertical joint employment. For each factor, the question is do both “employers:”

1. Hire or fire the employee;
2. Supervises and controls the employee work schedules or conditions of employment;
3. Determines the rate and method of payment; and
4. Maintain employment records.

A potential joint employer’s reserved right of control in relation to the above factors is relevant, but the actual exercise of control is more indicative of joint employer status. A reserved right of control alone, unlike the Biden rules, may not be enough to establish joint employer status.

There are other factors considered under the rule, but they are given very little weight, such factors include if the employee works exclusively on only one of the employers’ property and if one employer’s financial success is dependent on the other employer.  These additional factors are unlikely to undermine a determination of joint employer status if the four factors were unanimous.

The DOL also explicitly excluded three factors from the vertical joint employer analysis:

1. Whether the job requires special skills or judgment;
2. Whether the employee has the opportunity for profit or loss based on managerial skill; and
3. Whether the employee invests in required equipment or materials.

Horizontal Joint Employment

Horizontal joint employment is “where an employee works separate hours for two (or more) employers in the same workweek that are sufficiently associated with each other with respect to the employment of the employee.” If the entities are joint employers, the hours worked by the employee must be combined when determining overtime, as well as sharing liability for unlawful treatment of the employee.

The analysis differs from vertical joint employment. The focus is on whether the potential joint employers are independent of each other. Two entities will be considered “sufficiently associated” if:

1. There is an arrangement 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; or
3. 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.

Irrelevant Business Models and Practices

The DOL’s proposed rule excludes certain business models and practices from being considered in joint employer determinations:

• Operating as a franchisor or entering into a brand and supply agreement with the prime employer.
• Offering sample employee handbooks or other forms to another employer.
• Contractual agreements between employers requiring consistent quality control standards.
• Jointly participating in an apprenticeship program.
• Offering another employer an association health plan.
• Contractual agreements related to health, safety, or legal compliance.

What to Expect

The proposed rule is open for comments until late June, but even if finalized it may face challenges. As mentioned, a similar standard was adopted in 2020 during President Trump’s first term. The 2020 standard was later challenged by a group of state attorneys general and in 2021 a federal court found parts of the final rule unlawful. While slight changes have been made to address the court’s concerns it is likely the DOL’s current proposal will face its own challenges.

Employers should monitor any developments as the joint employer standard will affect employer liability in wage and hour cases and beyond. If you may be involved in a joint employer situation, seek competent counsel before the government investigates the joint employer issue.

Brody and Associates regularly advises management on compliance with the latest local, state and federal employment laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.