On April 23, 2026, the U.S. Department of Labor (DOL) Wage and Hour Division published a Notice of Proposed Rulemaking (NPRM) proposing a single 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, published at 91 Fed. Reg. 21878, is to be codified at 29 C.F.R. parts 500, 780, 791, and 825. The 60-day public comment period closes June 22, 2026, with comments accepted at Regulations.gov.
The proposed rule fills a regulatory gap that has existed since the DOL rescinded its 2020 joint employer rule in July 2021, following the Southern District of New York's partial vacatur in State of New York v. Scalia, 490 F. Supp. 3d 748 (S.D.N.Y. 2020).
When two or more entities are determined to be joint employers, each is jointly and severally liable for wages, damages, and penalties owed under the FLSA. Under the FMLA, jointly employed workers count toward each joint employer's coverage and eligibility thresholds. Under the MSPA, each joint employer must independently ensure that statutorily required disclosures, payroll records, and timely wage payments are provided. The financial exposure can be substantial, and the analysis often turns on facts that do not surface until litigation.
Since 2021, federal courts have applied divergent vertical joint employer standards under FLSA. The First, Fifth, and Ninth Circuits apply versions of the four-factor Bonnette control test as a totality-of-the-circumstances inquiry. The Second Circuit applies the four-factor Carter formal-control test, the six-factor Zheng functional-control test, or both. The Third Circuit applies the Enterprise test focused on secondary-employer control. The Fourth Circuit rejected Bonnette in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), in favor of a two-step framework. The Eleventh Circuit applies the eight-factor Layton economic-realities test. The Sixth, Seventh, Eighth, Tenth, and D.C. Circuits have not adopted a comprehensive test. The same staffing, franchise, or subcontractor arrangement can produce materially different outcomes depending on the forum.
The proposed rule distinguishes between two scenarios.
Vertical joint employment arises when an employee is jointly employed by two or more entities that simultaneously benefit from the work — typical in contractor and subcontractor relationships, staffing agency arrangements, and franchisor and franchisee arrangements. The employee works one set of hours and has at least one undisputed employer; the question is whether another entity benefiting from the work qualifies as a joint employer.
Horizontal joint employment arises when an employee works separate hours for two or more employers in the same workweek and the employers are sufficiently associated with respect to the employee's employment. The proposed rule treats employers as sufficiently associated when there is an arrangement to share the employee's services, when one employer acts directly or indirectly in the interest of the other employer in relation to the employee, or when the employers share control through common ownership or one employer's control of the other.
Drawing on Bonnette v. California Health & Welfare Agency, 704 F.2d 1465 (9th Cir. 1983), and Falk v. Brennan, 414 U.S. 190 (1973), the proposed rule applies four factors to vertical joint employer determinations: whether the potential joint employer hires or fires the employee; whether the potential joint employer supervises and controls the employee's work schedule or conditions of employment to a substantial degree; whether the potential joint employer determines the employee's rate and method of payment; and whether the potential joint employer maintains the employee's employment records.
No single factor is dispositive. The DOL provides that a unanimous finding on the four factors in either direction — pointing toward joint employer status, or pointing against it — establishes a substantial likelihood that the outcome is correct, and that additional factors are highly unlikely to outweigh that result. Additional factors may be considered, including indicia of economic dependence and whether the employee has a continuous or repeated relationship with the potential joint employer or works at a location owned or controlled by that entity, but those carry less weight than the four primary factors.
The proposed rule departs from the 2020 rule on two issues that drew judicial scrutiny in State of New York v. Scalia.
First, reserved control is relevant. The proposal treats a potential joint employer's contractual ability, power, or reserved right to act with respect to an employee as relevant to the analysis, even when not actually exercised — though actual exercise of control carries greater weight. The 2020 rule had required actual exercise of one of the four factors. Contractual rights to direct, monitor, or override staffing decisions — including provisions rarely invoked in practice — may now support a joint employer finding.
Second, economic dependence is permitted. The 2020 rule categorically excluded economic-dependence factors from the joint employer analysis. The proposal does not exclude them, recognizing that several federal courts treat economic dependence as relevant. The DOL clarifies, however, that economic dependence is not the ultimate question for joint employment — that question is more central to the separate inquiry of whether a worker is an employee or an independent contractor.
The proposed rule also broadens the statutory basis for the analysis. Where the 2020 rule relied solely on FLSA Section 3(d)'s definition of "employer," the proposal recognizes that Section 3(e)'s definition of "employee" and Section 3(g)'s "suffer or permit to work" standard are also relevant. The Scalia court found the 2020 rule's exclusive reliance on Section 3(d) inconsistent with the FLSA's broad statutory definitions.
The proposed rule clarifies that several common business practices, standing alone, do not make joint employer status more or less likely. These include operating as a franchisor, entering into a brand-and-supply agreement, or using a similar business model; requiring compliance with general legal obligations, health and safety standards, or anti-harassment policies, and monitoring or enforcing such provisions; requiring, monitoring, or enforcing quality control standards, including quantity standards, deadlines, and use of standardized products; and providing a sample employee handbook, offering or participating in an association health or retirement plan, or jointly participating in an apprenticeship program.
Notably, the DOL declined to readopt the 2020 rule's premises safe harbor — the provision that allowing another employer to operate on a business's premises, including store-within-a-store arrangements, is neutral for joint employer purposes. The DOL reasoned that several courts have treated premises ownership as relevant and that categorically excluding it would conflict with judicial precedent.
The proposed rule arrives against a regulatory history characterized by repeated administration-by-administration shifts. The Trump-era 2020 FLSA rule was partially vacated by the Southern District of New York in State of New York v. Scalia and rescinded by the DOL in July 2021. At the National Labor Relations Board, the 2015 Browning-Ferris standard recognizing indirect or reserved control was rejected in 2020, restored and expanded in 2023, vacated by a federal court, and formally returned to the 2020 standard in February 2026.
For employers, the practical implications are immediate even before the rule is finalized. Contractual provisions reserving control over staffing-agency or contractor employees — even provisions never exercised — may support joint employer findings under the proposed framework. Quality control, health and safety, and brand-protection requirements are protected under the safe harbors, but the removal of the premises safe harbor and the express acknowledgment of economic dependence as a permissible factor signal that the analysis is broader than the 2020 rule. State law standards, which often impose joint employer liability on terms broader than federal law, remain independently applicable and are not displaced by federal regulation.
The comment period closes June 22, 2026. Given the litigation history surrounding both the 2020 rule and the NLRB joint employer rules, the final rule — whenever issued — will face legal challenge. Compliance planning under contractor, franchise, and staffing arrangements should proceed on the assumption that the proposed framework reflects the operative federal direction, while preserving flexibility for further regulatory and judicial change.
This article is provided for informational purposes only and does not constitute legal advice. The information presented may not reflect the most current legal developments and should not be relied upon as a substitute for advice from qualified counsel. Receipt of this article does not create an attorney-client relationship with Maceira Zayas LLC.
