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The US Department of Labor’s (DOL) Wage and Hour Division recently announced a proposed rule that would establish a standard for determining joint-employer status under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The proposed rule seeks to harmonize the joint-employment framework by implementing a uniform standard across these three federal statutes. Notably, the 60-day comment period ended on June 22, 2026.

Under the FLSA, joint employers are “jointly and severally liable” for compliance with the statute’s requirements, including overtime pay. The proposed rule distinguishes between vertical and horizontal business relationships, establishing a separate standard for determining joint-employer status for each scenario. Vertical joint employment exists when an employee is “jointly employed by two or more employers that simultaneously benefit from the employee’s work” while horizontal joint employment exists when an employee “works separate hours for two (or more) employers in the same workweek” and the employers “are sufficiently associated with each other with respect to the employment of the employee.”

Vertical joint-employment standard

The DOL’s proposed rule restores a four-factor test advanced by the first Trump administration in 2019, which the Biden administration rescinded in 2021. When analyzing whether a vertical joint-employment relationship exists, the decision-maker must consider whether the potential joint employer:

• Hires or fires the employee
• Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree
• Determines the employee’s rate and method of payment
• Maintains the employee’s employment records (i.e., records that reflect, record, or relate to information regarding the hiring, firing, supervision of the employee; control of work schedules or conditions of employment; or the determination of how and how much the employee is paid).

Other factors may be assessed where appropriate under the circumstances, but the above four factors must be considered in every case and “typically carry greater weight in the analysis than any additional factors.” If all four factors point to one outcome (i.e., the presence or absence of joint employment), additional relevant factors are “highly unlikely, either individually or collectively, to outweigh the combined probative value of the four factors.”

Horizontal joint-employment standard

Under the horizontal joint-employment standard, employers that are “sufficiently associated with respect to the employment of the employee” must aggregate the employee’s total hours worked in the workweek for each of the employers to comply with the FLSA. Generally, employers will be considered sufficiently associated in the following three situations:

• The employers have an arrangement to share the employee’s services.
• “One employer acts, directly or indirectly, in the interest of the other employer in relation to the employee.”
• The employers, directly or indirectly, share control of the employee because one of the employers controls, is controlled by, or is under common control with the other employer.

Amendments to FMLA and MSPA

The DOL proposes revising the regulations that address joint-employer status under the FMLA and the MSPA to apply the proposed rule for joint-employer status under the FLSA.

Impact

The question of whether a business or entity is a joint employer may arise in a variety of contexts, including when an employer uses temporary employees from a staffing agency; hires contractors to perform services on the employer’s premises; engages a professional employer organization to carry out human resources functions, such as payroll processing or the administration of benefits; or operates as a franchisor. If adopted, the DOL’s proposed rule will impose the following liabilities upon a finding of joint employment:

• Joint employers will be liable for compliance with the FLSA’s overtime pay requirements.
• Joint employers will be required to count jointly employed workers when determining employer coverage and employee eligibility under the FMLA and may be responsible for accepting employees’ return from FMLA leave under certain circumstances.
• Joint employers will be responsible for ensuring that jointly employed workers receive all employment-related rights granted by the MSPA, including the payment of wages when due, and will be liable for the failure to provide an employee with such required protections.

Reconciling NLRB’s final rule and DOL’s proposed rule

Franchisors and businesses using staffing agencies are less likely to be deemed joint employers under both the National Labor Relations Board’s (NLRB) new final rule and the DOL’s proposed rule on joint employment.

In February 2026, the NLRB introduced a new final rule that narrowed the joint-employer standard under the National Labor Relations Act by requiring businesses to exercise substantial direct and immediate control over another company’s employees. This considerably decreased the likelihood that the NLRB will find joint-employer status for franchisors as compared to the 2023 rule, which only required indirect or reserved control. Similarly, the DOL’s proposed rule limits the risk of joint-employer exposure for franchisors under the FLSA, the FMLA, and the MSPA by expressly providing that using a franchise business model does not make joint-employer status more or less likely. Franchisors and businesses that use a staffing model may be deemed joint employers under the proposed DOL rule if the factors of the horizontal or vertical standards support the finding of joint employment.

Next steps

Employers should proactively assess their business relationships and the compositions of their workforces to determine the likelihood of joint-employer exposure under the new rule. Although business structures do not automatically give rise to joint-employer status under the new rule, entities that have some ownership of other business and entities that utilize staffing agencies or professional employer organizations as part of their workforces should evaluate those business relationships and their control over the other business’s employees to determine the likelihood of joint-employer liability in common risk areas, including improper payment of wages, employee misclassification, interference with FMLA leave, and infringement on agricultural worker protections. Additionally, franchisors should assess whether they have sufficient control over their franchisees’ employees to subject them to joint-employee liability under the new rule.

If you have any questions regarding this alert, please contact your McDermott Will & Schulte lawyer or one of the authors.