DOL Proposes New Rule for Joint Employers

On April 22, 2026, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking (NPRM) related to “joint employers.” This proposal addresses situations in which two or more entities share legal responsibility for the same worker, such as a temporary worker placed by a staffing agency or an employee working for two related businesses.

According to the DOL, the proposed changes will “ensure employees and employers have a clear, consistent understanding of when multiple employers are jointly responsible for protecting the wages and other rights of an employee.” The changes would set up a new test for determining an employer’s liability and compliance requirements. They would also affect how employees can pursue claims for unpaid wages and other benefits.

Why Propose Regulations About Joint Employment?

Allocating liability for joint employee claims is one of the most litigated and unsettled issues in wage-and-hour cases. The extent of each employer’s responsibility can be confusing, especially when federal, state, and local laws conflict.

To simplify these issues, the U.S. Department of Labor (DOL) drafted the “Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act” (RIN 1235-AA48). This regulation would clarify the responsibilities of joint employers and establish a single national standard.  

How Does Joint Employment Affect Workers’ Rights?

Joint employers are “jointly and severally liable” for ensuring workers receive the correct wages and benefits. If a worker files a claim for unpaid wages or other wage-and-hour violations, they can recover 100% of what they’re owed from any of their employers. If one employer pays more than their fair (or “pro-rata”) share, it can sue the other employers to recover their fair shares.

Joint employment also affects overtime pay. If an employee works for joint employers in the same week, the employers must consider their total combined hours when calculating their overtime eligibility, pay, and benefits.

Three federal laws often apply to joint employment situations: The Fair Labor Standards Act of 1938 (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Each law includes provisions addressing joint employer liability. However, they sometimes contradict each other or make it more difficult to determine each employer’s actual responsibilities and how to enforce workers’ rights. Federal circuit courts around the country have interpreted the laws differently, leading to different standards in different areas. The proposed changes would establish a uniform interpretation for all workers and answer many questions about how they should be applied.

What Are the Proposed Changes?

Many of the proposed changes aim to clarify when joint employment exists. It distinguishes “horizontal” and “vertical” joint employment relationships and establishes more concrete guidelines for determining if either applies to an employment situation.

In horizontal joint employment relationships, an employee works separate hours for at least two employers in the same workweek. The employers must be sufficiently associated with their employment of that employee to qualify as a joint employer. For example:

• A prep cook works for multiple locations of a popular pizza chain. Regardless of where she works on any given day, she performs similar duties and receives the same hourly rate. Although each location is set up as an independent corporate entity, a central organization manages scheduling, payroll, HR, and other employee-related matters. This is almost certainly a horizontal joint employment situation for this employee.

The proposed rule clarifies that business relationships, such as franchise arrangements or shared vendors, are not enoughto create a horizontal joint employment relationship. For example:

• Another prep cook is employed by two independent franchised restaurants, performing similar duties and receiving the same hourly rate at both. Although the restaurants share the same high-level corporate branding, they are entirely separate businesses with no financial affiliation or ownership. This probably isn’t a joint-employer situation for this employee.

Vertical joint employment relationships involve employees working directly for one company on behalf of another entity. It can be especially challenging to determine whether this type of situation leads to joint liability. The proposed rule would establish a four-factor “control” test for courts to decide if a vertical joint employment relationship exists.

The new test looks at whether each entity actually:

1. Hires or fires the employee.
2. Supervises and controls an employee’s work schedule or conditions of employment.
3. Determines the rate and method of payment.
4. Maintains employment records.

If each employer plays a substantial role in these factors, they are likely joint employers. Although a court can consider additional factors, these four elements are the “core” questions. The court should consider what a company actually does (“actual” control) rather than if a company merely reserves the right to do something (theoretical or “reserved” control).

For example:

• A law firm contracts with a staffing company for temporary employees. Both companies act like employers in some ways: The staffing company typically manages payroll, benefits, and similar issues, while the law firm directs and supervises the employee’s work. Both have some control over hiring or firing the employee, setting their schedule, and determining their pay rate. Both maintain employee records. This may be a joint employment situation.

The DOL expressly states that certain common business practices should not trigger joint employer liability if they do not exercise the core control aspects. These include:

• Requiring compliance with safety or anti-harassment policies.
• Providing model handbooks or HR guidance.
• Participating in joint apprenticeship or benefit programs.

The DOL explained that it intends this clarification to encourage responsible business practices without creating liability. For example:

• A law firm contracts with a general contractor to remodel its offices. The GC employs subcontractors, such as electricians and drywallers. It maintains sole control over hiring, firing, compensating, and supervising these subcontractors to complete the work. However, everyone who works on the job site must comply with the law firm’s safety protocols, including passing background checks to obtain access badges to secure areas. This likely does not create a joint employment situation.

The DOL’s proposed changes aim to establish a structured, control-based framework to help courts clarify when a true joint employment relationship exists. 

Practical Implications for Employers and Employees

If finalized, the emphasis on actual control and exclusion of common business practices could limit legal liability for many business entities that do not directly manage workers. A business that does not directly employ a worker may still face liability if it qualifies as a joint employer under the new framework.

The DOL hopes the rule will clarify when multiple entities are responsible for ensuring compliance with wage-and-hour protections. This may give employees more options to recover unpaid wages and benefits and help them understand their rights.

The NPRM is currently subject to a 60-day public comment period, which will end on June 22, 2026. Once this expires, the DOL may revise the proposal before issuing a final rule.

Recovering Unpaid Wages and Pursuing Employment Violations

Employees also have the right to pursue a civil lawsuit for the wrongful withholding of wages and other violations of federal employment laws. If you suspect your employer is improperly calculating your pay or withholding wages or benefits, consult with an experienced attorney.

Michigan employees may file complaints with the Michigan Wage and Hour Division about an employer improperly withholding wages or benefits. The state can impose legal and financial penalties on employers for violating state wage laws.

Contact Sommers Schwartz, P.C.

If you have questions about unpaid wages or other Michigan employment issues, contact Sommers Schwartz, P.C. Our experienced team of employment attorneys has decades of experience protecting Michigan workers’ rights and ensuring workers receive the pay they deserve. Contact us today to schedule a free, confidential, no-obligation consultation.