DOL Proposes Unified Standards for Determining Joint Employment

When it comes to joint employment, the line has not always been consistently clear on who certain responsibilities fall on, particularly in situations where work is outsourced by a staffing agency. Outcomes have varied based on the governing entities involved and how joint employment determinations are interpreted.

The Department of Labor (DOL) Wage and Hour Division published a Notice of Proposed Rulemaking on April 23, 2026, to establish a clearer framework for determining when multiple entities are considered employers of the same individual under federal wage, leave, and agricultural labor laws.

Why it matters

Joint employment and responsibility determinations can directly affect which party is legally responsible for wage, leave, and other compliance obligations. Varying approaches to joint employment are currently regulated by the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Under the existing frameworks:

• FLSA: Multiple entities defined as employers may share liability for wages and compliance with overtime regulations.
• FMLA: Multiple entities may need to count employees jointly to determine if the 50-employee threshold is applicable.
• MSPA: Agricultural labor protections under MSPA may extend responsibility beyond a direct hiring entity to labor contractors and other connected entities.

The DOL expressed that joint employment standards have not always applied consistently and have sometimes been treated as a checklist. A lack of uniformity can potentially lead to interpretations that can either lean more towards formal or practical control. For example, who supervises an individual on paper (formal interpretation), versus the entity that supervises and directs daily work (practical interpretation).

Previously determining factors

In the past, joint employment has often been determined by a checklist of relevant factors.

1983: The “four factors (to be) relevant” test

In a 1983 court case [Bonnette v. California Health & Welfare Agency (1983, Ninth Circuit)], the DOL considered four main factors when determining whether joint employment is applicable or not. Does the alleged joint employer:

1. Have the power to hire and fire the individual?
2. Supervise the individual and control the schedule or conditions of employment?
3. Determine the rate and method of payment?
4. Maintain employment records?

The Department has revised its approach over time in response to different interpretations and concerns that prior standards either overemphasized formal control or were inconsistently applied.

2020: Joint Employer Status Under the Fair Labor Standards Act (FLSA)

The four-factor test was adopted in March 2020 under the Joint Employer Status Under the Fair Labor Standards Act, with consideration of the previous guidelines and a few other adjustments. However, the DOL notably focused less on reserved rights and more on whether an alleged joint employer actively exercised its authority. It was later rescinded in July 2021.

Proposed rules that employers and staffing agencies need to know

While the 2026 proposed rule still retains a similar multifactor approach, it proposes evaluation of the overall employment relationship and the broader context of direct, indirect, and reserved control, rather than strict reliance on any single test. The Department explains that under the proposed rule, joint employer status would not be determined by a checklist or by any single factor, but rather by the totality of the relationship and the extent of the ability to exercise control over the terms and conditions of employment.

Alignment with FLSA employment definitions

The proposal relies on the FLSA’s joint employment framework, including its definitions of “employer,” “employee,” and “employ.” Because the FMLA and MSPA both incorporate these definitions, the Department proposes using a single FLSA-based analytical framework across all three statutes.

What this means for organizations that may be considered a joint employer

Whether a business is considered a joint employer can determine which rules apply, what wages must be paid, and how leave policies work. Changing the framing and evaluation process could potentially relieve some entities from responsibilities involved with joint employment, while increasing responsibility in other cases. 

The proposal is still in the early stages and could change as the rulemaking process continues. Verified Credentials will attempt to share more information on the proposal as it becomes available.

This content is for informational purposes only and shall not constitute legal opinion or advice. Consult your legal counsel to ensure compliance.