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New Proposed Rule: Joint Employer Status Under the FLSA, FMLA, and MSPA
On April 22, 2026, the U.S. Department of Labor (DOL) unveiled a proposed rule to determine joint employer status under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The DOL’s rule is intended to provide a uniform standard for determining joint employment status, to simplify enforcement, to reduce litigation and provide a level of clarity for employers and workers entering into specific employment arrangements.
What is Vertical Joint Employment?
The DOL’s new proposal advances a singular, nationwide standard which recognizes two forms of joint employment, vertical and horizontal employment. Vertical joint employment arises when an employee is “jointly employed by two or more employers that simultaneously benefit from the employee’s work,” which can include staffing agency relationships or contractor and subcontractor interactions. The proposed rule adopts a four-factor analysis to determine whether vertical joint employment exists, focusing on whether the alleged employer:
- "Hires or fires the employee;
- Supervises and controls the employee's work schedule or conditions of employment to a substantial degree;
- Determines the employee's rate and method of payment; and
- Maintains the employee's employment records."
There could be other relevant factors to the analysis. However, a unanimous finding of all the above factors "would establish a 'substantial likelihood'" the entity or individual is a joint employer. Further, the employer’s "ability, power, or reserved right to act in relation to the employee" is relevant to the analysis; however, the DOL instructs that the employer’s actual exercise of control is more relevant than just the potential for control.
What is Horizontal Joint Employment?
Conversely, horizontal joint employment occurs when an employee works separate hours for more than one employer in the same workweek “and the employers are sufficiently associated with each other with respect to the employment of the employee such that they are joint employers.” Employers are considered sufficiently associated if:
- "There is an arrangement between them to share the employee's services;
- One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
- They share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer."
The new proposed rule largely mirrors the pre-2020 horizontal employer analysis, which focuses on the relationship between employers based on the totality of the facts and circumstances.
The DOL also provides a list of business models and practices which, “standing alone, do not categorically or in the abstract make joint employer status more or less likely.” These actions include:
- Operating as a franchise, brand-and-supply agreements, and similar business models;
- Compliance with legal obligations or health and safety standards;
- Quality control and brand reputation standards; and
- Basic business practices, like "providing sample employee handbook[s]", "offering an association health or retirement plan," or "jointly participating in an apprenticeship program with another employer."
Key Takeaways
The proposed rule is not final, and interested parties have the opportunity to submit comments regarding the rule for 60 days, with the comment period closing at 11:59 p.m. (Eastern) on June 22, 2026.
Employers, particularly those with businesses who interact with staffing agencies and subcontractors, should remain informed of any updates regarding the proposed rule.
Should you have any questions regarding this proposed rule, please contact Elizabeth L. Bolduc or Juliana N. Fierro.
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Disclaimer: This alert has been prepared by Eastman & Smith Ltd. for informational purposes only and should not be considered legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney/client relationship.
