Consistency and Clarity: DOL Proposes Unified Joint-Employer Standard Across FLSA, FMLA, MSPA

The U.S. Department of Labor's (DOL) Wage and Hour Division on April 23, 2026, published a Notice of Proposed Rulemaking (NPRM) that would establish a single, nationwide standard for determining joint-employer status under the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The proposal applies a four-factor control test in so-called "vertical" joint-employment cases, where a worker has an immediate employer but potentially a second employer for the same work. It also addresses "horizontal" joint employment, which generally involves an employee who works for two related or associated employers during the same workweek such that the employers may be treated as joint employers for that employee. The proposed rule would treat both reserved (contractual) and indirect control as relevant while giving greater weight to control that is actually exercised. If adopted, the proposed rule could clarify and simplify potential joint-employer status for businesses that rely on staffing agencies, subcontractors, franchise models and other multi-entity workforce arrangements. The public comment period closes June 22, 2026.

This Holland & Knight alert summarizes the 2026 NPRM's core framework, highlights key departures from prior guidance and flags practical considerations for employers evaluating contracts and day-to-day oversight practices.

Background and Regulatory Context

The joint-employer doctrine determines when two or more businesses share legal responsibility for the same obligations for an employee. When a joint-employment relationship exists, each employer is independently liable for violations of those obligations. Joint-employer issues commonly arise under DOL-administered laws, including the FLSA, FMLA and MSPA. Such issues are particularly prevalent in the staffing, franchising, agriculture, healthcare and hospitality contexts.

In the last decade, federal guidance on joint-employer status has shifted significantly across administrations. In 2016, the Obama Administration's DOL issued an "Administrator's Interpretation" expanding the traditional joint-employment doctrine and introducing "vertical" and "horizontal" joint employment, which was rescinded during the first Trump Administration. In January 2020, the Trump Administration issued a final rule adopting a four-factor balancing test to assess vertical joint employment, focusing on actual control and rejecting liability based solely on reserved or contractual authority. In September 2020, a federal district court vacated the vertical joint employment portion of the rule, finding it inconsistent with the FLSA. Then in July 2021, the Biden Administration DOL rescinded the 2020 rule in its entirety, describing its vertical analysis as inconsistent with long-standing precedent and diminished worker protections by reducing the number of covered employers. The DOL did not replace the rule with another or issue new guidance.

Most recently, in April 2025, the DOL proposed a replacement regulation. The DOL states that the proposed rule seeks to address the lack of uniform regulatory guidance and resolve significant differences among the circuit courts. The proposed rule contains several adjustments to mitigate the legal concerns raised in the litigation over the 2020 rule. The department's stated goal is to provide a single, nationwide framework for determining joint-employer status, reducing uncertainty and lowering compliance risk for businesses.

Overview of the Proposed Rule

The NPRM, titled "Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act," was released by the DOL's Wage and Hour Division on April 22, 2026, and published in the Federal Register on April 23, 2026. Unlike the 2020 rule, which addressed only the FLSA, the proposed rule would also extend to the FMLA and MSPA.

The proposed rule applies a single analytical framework across all three statutes. The DOL reasons that a unified approach is appropriate because the FMLA and MSPA both incorporate the FLSA's broad definitions of "employ" and "employer."

Vertical Joint-Employment Analysis

As noted above, the DOL conceptualizes two distinct types of joint employment. Vertical joint employment occurs when a worker is formally employed by one company but another company qualifies as an employer because it effectively controls key aspects of the work. Horizontal joint employment occurs when an employee works for two separate but related employers that are sufficiently associated to be treated as joint employers for that employee. Each type is analyzed under a distinct framework, as discussed below.

Under the proposed rule, the DOL adopts a single, uniform framework for evaluating vertical joint employment in every case. The proposed rule would direct investigators and courts to apply a four-factor test examining whether the potential joint employer 1) hires or fires the employee, 2) supervises or controls the employee's work schedule or conditions of employment to a substantial degree, 3) determines the employee's rate and method of pay and 4) maintains employment records. The new standard would address the defects identified by the 2020 district court case mentioned above by aligning the regulation more closely with the FLSA's broad definitions of "employ" and "employee" and long-standing judicial precedent. The DOL expects the proposed vertical joint employment standard to provide a consistent structure for analyzing complex, multi-employer work arrangements.

The proposed rule places primary emphasis on the actual exercise of control over the employee's work while permitting consideration of reserved or indirect control as part of the overall analysis. Reserved or indirect control, standing alone, is given less weight, but it is not irrelevant. The DOL also recognizes that additional factors may be considered where appropriate, although consistent findings across the four core factors may, on their own, establish a substantial likelihood of joint-employer status. In practice, this approach signals increased scrutiny of staffing agency, subcontractor and similar arrangements where day-to-day control is exercised in fact, even if formal authority is nominally allocated elsewhere.

Horizontal Joint-Employment Analysis

The proposed rule largely retains the horizontal standard from the 2020 rule and long-standing guidance dating back to 1958. The focus remains on whether two or more employers are sufficiently associated with respect to the employment of the employee during the same workweek. Employers will generally be considered sufficiently associated where 1) an arrangement exists between them to share the employee's services, 2) one employer is acting directly or indirectly in the interest of the other with respect to the employee, or 3) they are commonly owned or controlled. When horizontal joint employment exists, the employee's hours must be aggregated across employers for FLSA overtime purposes.

The proposed rule clarifies that ordinary business relationships having little to do with the employment of a specific worker are not, standing alone, sufficient to establish horizontal joint employment. Examples include sharing a vendor or being franchisees of the same franchisor.

What the Proposed Rule Would Not Do

The proposed rule would not eliminate a fact-specific, case-by-case inquiry. It expressly preserves the "economic reality" framework for the broader analysis of the employment relationship. The DOL has stated that no single factor is dispositive and the ultimate determination of joint-employer status depends on the facts in a particular case. The proposal meaningfully advances uniformity at the federal level without displacing the long-standing requirement for fact-specific, case-by-case analysis.

Practical Implications for Employers

• The proposed rule would most affect staffing agency, subcontracting, franchising and other layered workforce arrangements. Because the rule would apply across the FLSA, FMLA and MSPA, a single joint-employer finding could trigger overlapping wage, leave and agricultural worker obligations under all three statutes.
• When joint employment exists, all joint employers are independently responsible for wages (including back wages), overtime, FMLA leave obligations and MSPA protections, when applicable. If two businesses are found to be joint employers under the FLSA, an employee's total hours worked each week for all joint employers must be aggregated to determine overtime eligibility. Under the FMLA, both joint employers must count the employee for purposes of employer coverage and employee eligibility. However, only the primary employer is responsible for providing required FMLA notices, administering leave and maintaining group health benefits during leave. Job restoration is also the responsibility of the primary employer, while the secondary employer's obligation is limited to accepting the employee returning from FMLA leave. Under MSPA, joint employers share responsibility for wage payment, payroll records, postings and related protections.
• The proposed rule's recognition of reserved control as relevant means that contractual rights to supervise, direct or terminate workers – even if never exercised – may increase exposure.

Employers should audit staffing, vendor and contractor agreements and review day-to-day supervisory practices to ensure alignment between intended workforce structures and actual operations. The rule's emphasis on actual practice over contractual labels means that even well-drafted agreements cannot insulate an entity where day-to-day conduct reflects the exercise of direct control.

Next Steps and Comment Period

With the NPRM now published in the Federal Register, the public comment period is open for 60 days and closes on June 22, 2026, at 11:59 p.m. ET. Comments may be submitted via Regulations.gov.

After the comment period closes, the DOL will review submissions and may revise the proposed rule before issuing a final rule. Given the litigation history surrounding prior joint-employer rules, further legal challenges are likely.

Employers with complex staffing, franchise or agricultural operations should consider submitting comments and use the comment period to evaluate how their current arrangements would be treated under the proposed framework.

If you would like assistance preparing a comment for submission or have questions about the DOL's proposed joint-employer rule and how it may affect your business, please contact the authors or your Holland & Knight attorney.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.