DOL Issues Proposed Rule On “Joint Employment”

On April 21, 2026, the U.S. Department of Labor (DOL) issued a notice of proposed rulemaking (NPRM) outlining a new standard for “joint employment” — under which separate entities will be found jointly liable for the other’s violations — under the Federal Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Seasonal Agricultural Worker Protection Act (MPSA). The Proposed Rule purports to standardize the definition of “joint employment” across all three laws to create “clarity” and “uniformity” for employers and employees alike.

The Proposed Rule is substantively similar to the DOL’s 2020 joint employer final rule that was issued during the first Trump administration.  The DOL under the Biden administration rescinded that rule, but it never issued a replacement rule. As discussed below, the Proposed Rule sets out standards for two types of joint employment: vertical and horizontal.

Vertical Joint Employment

Vertical joint employment exists when an employee “is jointly employed by two or more employers that simultaneously benefit from the employee’s work.” The Proposed Rule sets out a four-factor balancing test to determine the existence of vertical joint employment:

Whether the other person or entity:

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

The Proposed Rule makes clear that other factors may be considered, but if these four factors are met, there is a substantial likelihood the DOL will conclude there is vertical joint employment. The Proposed Rule also identifies some factors that should not be considered, as they go instead to the analytical differences between employees and independent contractors, such as (1) whether the employee is in a job that requires special skill, initiative, judgment, or foresight; (2) whether the employee has the opportunity for profit or loss based on their managerial skill; and (3) whether the employee invests in equipment or materials required for work or the employment of helpers.

Horizontal Joint Employment

Horizontal joint employment exists when an employee works separate hours for two or more employers 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.” 

While the Proposed Rule does not set out a multifactor test for horizontal joint employment, it focuses on the degree of association between the employers. The Proposed Rule provides three scenarios where that association is sufficient to create horizontal joint employment:

1. There is an arrangement between them to share the employee’s services.
2. One employer is acting directly or indirectly in the interest of the other in relation to the employee.
3. The two entities share control of the employee, directly or indirectly, because one employer controls, is controlled by, or is under common control with the other employer.

The Proposed Rule notes that horizontal joint employment is determined based on the totality of the circumstances. Likewise, the Proposed Rules states that “business relationships between two employers that have little to do with their employment of specific workers, such as sharing a vendor or being franchisees of the same franchisor, are not generally probative, and could not alone indicate a sufficient association between the employers to establish that they are joint employers.”

The Proposed Rule will be open for public comment for 60 days. Following this 60-day period, DOL will review the comments and issue a final rule.

Our team is tracking this issue closely and is here to ensure your business is prepared for any changes. Please do not hesitate to reach out to any Crowell & Moring lawyer to discuss this Proposed Rule or how it may impact your business.