Labor Department proposes nationwide joint-employer standard

The U.S. Department of Labor has issued a proposed rule to clarify when multiple businesses may be considered joint employers under federal wage and hour laws, aiming to create a more consistent national standard.

The proposed rule would establish a single test for determining joint-employer status under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act.

The DOL said the rule is intended to address inconsistent interpretations across federal courts by aligning the analysis under these statutes and providing clearer regulatory guidance.

The goal is to ensure that employers and employees have a consistent understanding of when more than one entity may be responsible for wages and working conditions.

The proposed rule also reflects the latest shift in a long-running debate over joint-employer liability, which has varied across administrations and federal courts. The DOL’s approach is generally viewed as narrowing the circumstances in which businesses may be held responsible for another entity’s workers, particularly in franchising and contracting arrangements.

Liability implications

Under the proposed rule, when a joint employment relationship exists, multiple employers may be jointly and severally liable for compliance with wage and hour obligations.

That includes responsibility for all hours worked, minimum wage, overtime pay, and other required compensation.

The DOL emphasized that clearer standards are intended to improve enforcement efficiency while helping ensure that workers receive all wages owed, even where one employer is unable or unwilling to pay.

Joint-employer status remains a critical issue for businesses that rely on staffing agencies, subcontractors, franchise models, or other multi-entity arrangements. A finding of joint employment can significantly expand liability exposure.

The proposed rule reflects an effort to reduce uncertainty created by differing court decisions and to provide a more predictable framework for evaluating shared employment relationships.

Employers should evaluate how their business relationships and operational structures may be affected by a more clearly defined joint-employer standard.

That includes reviewing relationships with staffing firms, contractors and affiliated entities to assess potential shared control over workers and ensuring that roles and responsibilities in employment-related agreements are clearly defined.

Employers should also coordinate with legal and compliance teams to assess potential joint-employer exposure and consider participating in the rulemaking process. The proposal is open for public comment through June 22, 2026.