On April 22, 2026, the U.S. Department of Labor proposed a new rule that would create a single, nationwide standard for deciding when two or more businesses count as “joint employers” of the same workers. The proposed rule was published in the Federal Register the following day and applies to three federal laws at once: the Fair Labor Standards Act (FLSA, covering wages and overtime), the Family and Medical Leave Act (FMLA, covering job-protected leave), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
“Joint employer” is a legal label that matters when something goes wrong. If two businesses are joint employers of the same worker, both can be held liable for unpaid wages, overtime violations, and other damages. For small businesses that rely on staffing agencies, subcontractors, or franchise arrangements, this label has real financial consequences.
What the Four-Factor Test Looks At
The proposed rule introduces a four-factor balancing test for so-called “vertical” joint employment, the most common scenario. According to the DOL’s official NPRM page, the test looks at whether the potential joint employer hires or fires the worker, supervises and controls the work schedule or conditions to a substantial degree, determines the rate and method of pay, and maintains employment records.
No single factor is make-or-break. But if all four point in the same direction, the DOL says there is a “substantial likelihood” of a joint employment finding, or a lack of one.
The proposal also addresses “horizontal” joint employment, where a worker puts in separate hours for two related businesses in the same week. Simply sharing a vendor or being franchisees of the same brand is not enough on its own to trigger that label.
What This Means for Small Business Owners
The DOL explicitly noted that common business practices like requiring safety compliance, providing a sample handbook, or setting quality-control standards do not automatically make you a joint employer. That is intended as a relief for franchise operators and businesses that oversee vendor work on-site.
However, if you actually exercise control over a partner’s workers, such as setting their schedules, approving their pay rates, or making hiring decisions, those actions could tip the scales. Now is a good time to review staffing and contractor agreements with an attorney. Look at who is actually directing work day to day, not just what the contract says on paper.
Keep in mind that some states have stricter joint-employer rules than this proposed federal standard. Federal compliance alone may not be enough depending on where you operate.
The rule is still a proposal, not final law. The public comment period is open until June 22, 2026. Small business owners and trade groups can submit feedback through regulations.gov. After comments close, the DOL will review feedback and could revise the rule before issuing a final version.
