2026 Joint Employer Status - DOL Rulemaking

Regulatory Topic: Joint Employer Status

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Link to Regulation

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Regulatory Comment Open until 06/22/2026

Summary

On April 22, 2026, the Department of Labor’s (DOL) Wage and Hour Division issued a Notice of Proposed Rulemaking (NPRM) to restore clear federal standards for determining when two entities share responsibility for a worker’s wages and rights. For too long, regulatory uncertainty around joint employer status has threatened the business partnerships that create jobs for millions of American workers—through contracting and subcontracting arrangements, franchising, staffing agencies, and countless other business arrangements.

The proposed rule reinstates the same four-factor test from the Trump administration’s 2020 rule for determining vertical joint employment, and the same “sufficiently associated” standard for horizontal joint employment. It also makes targeted changes to address the legal problems that caused a federal court to partially strike down that earlier rule, making this proposal more durable and legally sound.

The proposed rule would also apply the Fair Labor Standards Act (FLSA) joint employer analysis to the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) through conforming regulatory changes, improving uniformity across all three statutes enforced by the Wage and Hour Division.[1]

Why This Matters for American Workers and Businesses

Millions of American workers depend on subcontracting arrangements, the franchise system, and the staffing industry, for their livelihoods. There are more than 800,000 franchise establishments in the United States, supporting nearly 8.9 million direct jobs.[2] Staffing agencies place millions of workers every week in industries ranging from healthcare to manufacturing to logistics.[3] Subcontracting is the backbone of the construction industry and much of the service economy.

These business models thrive on clarity. When a general contractor knows that overseeing safety standards on a job site does not automatically make it responsible for a subcontractor’s payroll, it is more willing to set and enforce those standards. When a business knows it can use a staffing agency to access workers during peak periods without becoming their employer, it is more willing to use that arrangement, creating jobs that might not otherwise exist. And when a franchisor knows that providing training resources or quality control standards to its franchisees does not make it the employer of the franchisee’s workers, it is more willing to offer those resources, benefitting the workers and Americans as a whole.

The Biden administration’s decision to rescind the Trump administration’s 2020 final rule— which a federal court had partially vacated, striking down the vertical joint employment standard while leaving the horizontal standard intact—eliminated that clarity. In its place, the Biden DOL directed investigators to apply a broad “totality of the circumstances” approach that considered any and all facts bearing on the employment relationship with no defined factors, no weighting, and no limiting principle. Without a clear standard, businesses could not know in advance whether a given arrangement would expose them to joint employer liability. Workers in contractor, staffing, and franchise jobs faced the threat of the relationships that employed them being unwound by litigation or backward-looking government investigation. Today’s proposed rule restores predictability.

Background

Joint employment exists when two or more entities share responsibility for a single worker’s wages, overtime, and other obligations under federal labor law. There are two scenarios:

• Vertical joint employment occurs when one business employs a worker and another business simultaneously benefits from that work. For example, when a staffing agency places a worker with a client company, or when a franchisee employs workers. The question is whether the second business is also an employer of the worker. The four factors relevant to the determination of whether a person/entity is a joint employer are whether the person/entity:
  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 one factor is dispositive—whether joint employment exists depends on all the facts in that particular instance.

• Horizontal joint employment occurs when the same worker works separate hours for two or more employers in the same workweek who are “sufficiently associated” with each other. For example, two restaurants under the same ownership that share a cook’s schedule. In that case, the employers must aggregate the worker’s hours across both jobs for FLSA purposes.

When joint employer status is found, both businesses are jointly and severally liable for the worker’s wages and any violations of federal law. The stakes are significant: a finding of joint employer status can expose a business to liability for wages, overtime, and penalties related to workers it did not directly hire, supervise, or pay.

The question of where to draw the line—i.e., how much association or control is enough to make two businesses joint employers—has been contested for decades across administrations, courts, and agencies. The 2026 proposed rule is the latest attempt to provide a workable, durable answer.

Conclusion

Clearer joint employer standards protect the business partnerships that create jobs for millions of American workers. The 2026 proposed rule is a meaningful step toward restoring the predictability that staffing agencies, subcontractors, franchisees, and the workers they employ need to thrive. Today’s proposal respects the economic realities of how businesses and workers actually operate while remaining faithful to the statute and to decades of judicial precedent.

How You Can Support the 2026 Proposal

The Wage and Hour Division is soliciting comments from the public on all aspects of the proposed rule. Comments explaining how your job, business, industry, or workers have been affected by regulatory uncertainty around joint employer status, or how the 2020 final rule’s clarity benefited your operations, are among the most valuable contributions you can make to this rulemaking.

[1] FLSA sets the federal minimum wage, overtime, and other standards for employees; FMLA entitled employees to unpaid, job-protected leave for qualifying family and medical reasons; and MSPA protects migrant and seasonal agricultural workers by establishing employment standards.

[2] https://www.franchise.org/franchising-economic-outlook/

[3] https://americanstaffing.net/posts/2026/03/30/employment-and-sales-rebound-in-q4/