By: Philip Giorlando
On April 22, 2026, the Department of Labor’s Wage and Hour Division released a proposed rule establishing a joint employer standard under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. This proposed rule is an effort to re-create the more reasonable 2020 joint employer rule passed during the first Trump administration but struck down by courts.
Background and Key Departure from the 2020 Rule
The proposal largely tracks a similar rule promulgated during the first Trump administration — but with deliberate adjustments designed to survive the judicial review that sank its predecessor. A federal court struck down the 2020 rule on the grounds that limiting joint employer status to situations involving actual control over workers was inconsistent with the FLSA’s broad definition of “employ.” The new proposal threads that needle by acknowledging that a potential employer’s reserved right to control workers is relevant, while still treating actual exercise of control as more probative — and providing that reserved control alone does not establish joint employer status.
Read more: DOL Proposes New Joint Employer Rule Under the FLSA, FMLA, and MSPAThe Four-Factor Test: Vertical and Horizontal Joint Employment
For “vertical” joint employment — the most common scenario, typically involving staffing agencies or subcontractors — the rule applies a four-factor test: whether the potential joint employer hires or fires the employee, supervises and controls the employee’s work schedule or conditions of employment to a substantial degree, determines the rate and method of payment, and maintains employment records. For “horizontal” joint employment, where an employee works separate hours for two related employers and overtime must be aggregated, joint employer status turns on whether the employers are “sufficiently associated” — such as through an arrangement to share the employee’s services or a common control relationship.
What Is Expressly Not Relevant — Good News for Franchisors and Contractors
Of particular note for franchise systems and businesses using contractors, the rule expressly provides that operating as a franchisor, requiring legal compliance, imposing health and safety standards, or mandating quality control and brand standards does not make joint employer status more or less likely. The DOL also unified the joint employer standard across all three covered statutes — a practical benefit that eliminates the need for separate analysis under the FLSA and FMLA.
What to Expect Next
The proposed rule is open for public comment for 60 days following Federal Register publication, with comments due in late June 2026. A legal challenge after finalization is widely expected, though this rule is carefully reasoned and avoids the novel legal theories that left the 2020 rule exposed.
Employer Takeaway
Businesses should use the comment period to have their contractor and staffing arrangements reviewed against the four-factor framework. Companies exercising meaningful day-to-day control over third-party workers’ schedules, pay, or employment records remain at greatest risk and should coordinate with legal counsel to address that risk. Those whose involvement is limited to quality standards and contractual compliance are on firmer ground — and should have that distinction documented now.
BSW Labor and Employment Law Blog 