DOL looks to “simplify” joint employment

The US Department of Labor (DOL) has proposed a new standard for determining when two or more employers can be jointly liable for violations of three federal employment laws.

The DOL’s draft rule would establish four key factors to consider when deciding whether an employer is a joint employer under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) – namely, whether the 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.

The proposal includes several examples of how these factors should be applied, one of which involves an office park company that hires a janitorial services company to clean the office park building after-hours.

The office park agrees to pay the janitorial company a fixed fee for these services and reserves the right to supervise the janitorial employees. However, the office park does not set the janitorial employees’ pay rates or individual schedules and does not actually exercise its authority to supervise the workers. In this scenario, the office park is not a joint employer because it does not hire or fire the employees, determine their rate or method of payment, or exercise control over their conditions of employment.

The first Trump administration issued a nearly identical joint employment rule in 2020. However, that rule was repealed the 2021 under the Biden administration, leaving a regulatory hole that has been filled by the courts.

The 2026 proposal differs from the 2020 version in many key respects, however. Most significantly, it softens a provision in the old rule requiring that an employer had to actually exercise one or more of the four factors to be a joint employer, replacing it with a provision stipulating that exercised control is more relevant than control that is reserved but rarely or never exercised. Another significant change is that the 2026 rule would replace the current FMLA joint employment regulation with a reference to the new FLSA joint employment analysis. 

“The rule we propose today would deliver much-needed regulatory clarity in the face of divergent judicial precedent throughout federal courts of appeals,” DOL administrator Andrew Rogers said in a statement. “Clear guidance strengthens worker protections because it ensures that employees receive all wages and benefits they are owed, even if one employer is unable or unwilling to pay. The proposal would also reduce compliance and litigation costs for employers while helping Wage and Hour Division investigators identify what is and is not a joint employment relationship.”

Although the proposal will no doubt be closely watched by franchisors, staffing agencies, companies that hire subcontractors and other employers at risk of joint employment, it is unlikely to have the same impact as the 2020 rule. Courts have the final say on joint employment, and courts no longer need to follow agency interpretations like the DOL’s proposed rule in the wake of the Supreme Court’s 2024 Loper Bright ruling.

It also is important to note that there is a separate joint employment standard for labor relations, which is more strict. Unionized employers could be liable for joint employment under the National Labor Relations Act (NLRA) even if they are not under the proposed FLSA/FMLA/MSPA standard.