DOL Proposed Rule 2026: What Employers Need to Know About the New Joint Employer Standard
Executive Summary: The DOL’s Proposed Joint Employer Rule
On April 22, 2026, the U.S. Department of Labor’s Wage and Hour Division (WHD) released a proposed rule that would establish a single nationwide standard for determining joint employer status under three major federal labor laws: 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 aims to resolve long-standing circuit court splits by deriving a uniform test from common federal court precedent. It would govern when two or more employers are jointly and severally liable for wages, damages, and other relief owed to employees.
The 60-day public comment period closes June 22, 2026. Employers who use staffing agencies, franchise models, subcontractors, or other multi-employer arrangements should carefully evaluate the proposed rule and consider submitting comments. This article provides a detailed analysis of the rule’s provisions, compares it to prior administrations’ approaches, and offers actionable compliance steps.
The Proposed Four-Factor Vertical Joint Employment Test
The proposed rule distinguishes between two types of joint employment: vertical and horizontal. For vertical joint employment—where an employee works directly for one employer (the primary employer) but another entity also benefits from the work—the rule adopts a four-factor balancing test. No single factor is dispositive; the totality of the circumstances governs.
The four factors are:
- Hiring and firing – Whether the potential joint employer has the power to hire, terminate, or select employees.
- Supervision and control of work schedules and conditions – Whether the entity directly supervises employees or controls their day-to-day tasks, schedules, or working conditions.
- Determination of pay and compensation – Whether the entity sets pay rates, approves time records, or otherwise determines compensation.
- Maintenance of employment records – Whether the entity keeps payroll, time, or other employment records.
The rule also allows consideration of additional factors, but they carry less probative weight. This framework largely mirrors the Trump-era 2020 rule that was struck down by federal courts, but with modifications intended to address prior legal shortcomings. Notably, the proposed rule does not address joint employment under the National Labor Relations Act (NLRA), which remains governed by separate Board precedent.
Horizontal Joint Employment: Aggregating Hours Across Associated Employers
Horizontal joint employment arises when an employee works for two or more employers that are sufficiently associated with each other. Under the proposed rule, the key inquiry is whether the employers are sufficiently associated such that they should be treated as a single enterprise. Mere business relationships, common ownership, or shared management are not enough; the association must be meaningful enough to justify aggregating hours for overtime purposes under the FLSA.
For example, if a worker holds two part-time jobs at separate but affiliated companies—such as two restaurants under common ownership with shared payroll functions—the hours may need to be combined for overtime calculation. This protects workers from being denied overtime pay simply because their work is split across related entities.
Regulatory Pendulum: Comparing the 2020, 2024, and 2026 Rules
The joint employer rule has swung with each administration. Understanding these shifts helps employers anticipate enforcement trends.
| Administration | Year | Key Features | Status |
|---|---|---|---|
| Trump | 2020 | Four-factor test for vertical joint employment; narrow definition; excluded indirect control and reserved authority. | Struck down by federal courts in 2021. |
| Biden | 2024 | Expanded “economic realities” test; considered indirect control and reserved authority; broader liability. | Withdrawn or superseded by 2026 proposal. |
| Trump (proposed) | 2026 | Four-factor balancing test; largely tracks 2020 rule with modifications; aims for single nationwide standard. | Proposed; comment period ends June 22, 2026. |
The 2026 proposed rule represents a return to the narrower, more predictable framework of the 2020 rule, but with adjustments to address the legal defects that led to its invalidation. The DOL’s stated goals include simplifying compliance, strengthening worker protections, reducing litigation, and enhancing uniformity in WHD investigations.
Practical Steps for Employers to Assess Joint Employer Exposure
Employers who use staffing agencies, franchisees, subcontractors, or temporary workers should take proactive steps to assess their FLSA joint employer, FMLA joint employer, and MSPA joint employer exposure. Here are key actions:
- Review contracts – Examine agreements with staffing firms, franchisees, and subcontractors. Identify clauses that grant or reserve rights to hire, fire, supervise, set pay, or maintain records.
- Audit actual practices – Even if contracts say otherwise, day-to-day practices matter. Determine whether your managers directly supervise contingent workers or control their schedules and pay.
- Assess horizontal associations – If you own or control multiple entities, evaluate whether they are “sufficiently associated” under the proposed rule. Shared payroll, common ownership, or overlapping management may trigger aggregation of hours.
- Train HR and operations teams – Ensure that hiring managers and supervisors understand the four-factor test and avoid actions that could create joint employer liability.
- Document decision-making – Maintain clear records showing which entity exercises control over each factor. This can help defend against claims of joint employment.
Implications for HR Compliance, Wage and Hour Liability, and Employee Benefits
The proposed rule has significant implications across HR compliance domains:
- Wage and hour liability – Joint employers are jointly and severally liable for minimum wage, overtime, and damages. A misstep could mean liability for back wages owed by a non-compliant staffing agency.
- FMLA leave – Under the FMLA, joint employers must count the employee’s combined hours of service for eligibility. The proposed rule clarifies which entity is responsible for providing leave and reinstatement.
- MSPA compliance – For agricultural employers, joint employer status affects housing, transportation, and wage obligations under the MSPA.
- Employee benefits – While the rule does not directly govern benefits, joint employer determinations can affect eligibility for health insurance, retirement plans, and other benefits tied to employment status.
Given the complexity, employers should consider leveraging compliance technology to monitor regulatory changes and manage vendor risks. Platforms like AIGovHub offer continuous compliance monitoring tools that can help track developments in the joint employer rule and assess the compliance posture of staffing partners and subcontractors.
Key Takeaways
- The DOL’s proposed rule (April 22, 2026) would create a single nationwide standard for joint employer status under the FLSA, FMLA, and MSPA.
- Vertical joint employment uses a four-factor balancing test: hiring/firing, supervision, pay determination, and record maintenance.
- Horizontal joint employment requires sufficient association between employers; business relationships alone are insufficient.
- Comments are due June 22, 2026. Employers should review their arrangements and consider submitting feedback.
- Proactive contract review, practice audits, and training can reduce exposure to joint employer liability.
Stay Ahead of Regulatory Changes with AIGovHub
Navigating the evolving joint employer rule landscape requires real-time intelligence and robust compliance infrastructure. AIGovHub’s CCM Module (Continuous Compliance Monitoring) connects directly to your ERP systems—SAP, Dynamics 365, Workday, Oracle, NetSuite—to automate controls testing and evidence collection for wage and hour compliance. Meanwhile, the SENTINEL Module provides geopolitical and supply chain risk intelligence, helping you vet staffing partners and subcontractors against sanctions lists and emerging threats.
Explore AIGovHub’s compliance tools today to track the DOL proposed rule 2026 and ensure your organization is prepared for whatever standard ultimately takes effect.
This content is for informational purposes only and does not constitute legal advice.