U.S. Department of Labor Proposes Joint Employer Rule Changes

On April 22, 2026, the U.S. Department of Labor (DOL) announced the Notice of Proposed Rulemaking (NPRM) to revise and harmonize its joint employer analysis across the FLSA, FMLA and MSPA. The proposal seeks to address longstanding ambiguity by establishing a uniform national standard, drawing on areas of consensus among federal courts, while resolving key circuit splits. Acting Secretary of Labor Keith Sonderling emphasized that the rule is intended to provide greater clarity for businesses, improve employees’ understanding of their rights and enhance the efficiency of DOL enforcement efforts.

The NPRM’s proposed analytical framework would do the following:

• Establish distinct standards for “horizontal” and “vertical” joint employment.

-Horizontal joint employment would exist where “separate employers are sufficiently associated with respect to the employment of the same employee.” The proposed rule identifies three relevant considerations: (1) whether the employers have an arrangement to share the employee’s services; (2) whether one employer acts, directly or indirectly, in the interest of the other with respect to the employee; or (3) whether the employers share control of the employee through common ownership or other forms of control. The rule clarifies that business relationships unrelated to the employment of specific employees—such as sharing a vendor or operating as franchisees of the same franchisor—are, standing alone, insufficient to establish joint employment.

-Vertical joint employment would exist where there is a “substantial likelihood” of a joint employment relationship based on four core factors: whether the potential joint employer (1) hires or fires the employee; (2) substantially supervises or controls the employee’s work schedule or conditions of employment; (3) determines the employee’s rate and method of pay; and (4) maintains employment records. While courts may consider additional factors, a uniform finding across these four factors, either for or against a joint employer finding, would establish a “substantial likelihood” that joint employment does or does not exist.

• Exclude independent contractor–focused factors from the joint employment analysis.
  The proposal removes consideration of factors relevant only to employee-versus-independent contractor classification, including whether the worker: (1) uses specialized skill, initiative, or judgment; (2) has an opportunity for profit or loss based on managerial skill; or (3) invests in equipment, materials, or helpers.
• Clarify that certain common business practices do not establish joint employment.
  The rule would deem the following insufficient, on their own, to support joint employer status: (1) contractual provisions related to health, safety, or legal compliance (e.g., anti-harassment policies, background checks, workplace safety requirements); (2) sharing sample employee handbooks; (3) offering association health or retirement plans; (4) participating jointly in apprenticeship programs; (5) operating under franchise, brand, or supply agreements; and (6) imposing quality control standards to protect brand or product consistency. This clarification is particularly significant in vertical joint employment contexts, including franchisor–franchisee relationships.
• Include illustrative examples.
  The NPRM provides fact-specific examples demonstrating how the proposed framework would apply in practice.

Practical Considerations for Employers
Businesses should evaluate potential joint employer exposure in light of their current practices and prepare for possible implementation of the rule:

• Assess control in practice—not just on paper. Evaluate who actually directs, supervises and sets the terms and conditions of employment.
• Review staffing and affiliate arrangements. Pay close attention to shared employees, subcontracting relationships and intercompany workforce structures.
• Account for state law variations. Many states apply their own, often more stringent, joint employer standards that would not be preempted by the proposed rule. Employers should use this opportunity to review and, if necessary, restructure subcontracting, staffing and other business arrangements to ensure compliance under both federal law and applicable state law.
• Coordinate timekeeping and payroll practices. Ensure shared employees accurately track total hours worked across employers and receive proper overtime and wage payments.