DOL Regulation Update: Joint Employer Status
Basics of the New Joint Employer Rule
On April 22, 2026, The Department of Labor (DOL) announced a new proposed rule for determining joint employer status (the “Proposed Rule”) under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Addressing a lack of regulatory guidance in evaluating whether joint employment exists under the FLSA, the goal of the Proposed Rule is to provide a nationwide standard to employers, employees, and DOL investigators in the wake of various tests being used in different jurisdictions. The Proposed Rule also amends the FMLA and MSPA to include the same joint employment analysis as the proposed FLSA analysis.
Over the past several years, the FLSA joint employer analysis has changed with the administration in power. In 2020, during President Trump’s first term, the DOL issued a similar rule defining a “joint employer” as an employer that (1) hires or fires the employee; (2) has substantial supervision and control over the employee’s work schedule or employment conditions; (3) determines the manner and rate at which the employee is paid; and (4) maintains the employee’s records. In 2021, the Biden administration rescinded this rule in its entirety. Since then, businesses have operated without a federal joint employer rule under the FLSA, and have been subject to various tests in different jurisdictions.
Joint Employment Explained
Joint employer liability is the concept that one business may be liable for another business’s employees. Joint employer liability exists under various statutes including the FLSA and the National Labor Relations Act (NLRA). There are two general types of FLSA joint employment relationships: horizontal and vertical.
A horizontal joint employment relationship involves an employee working separate hours for two or more “sufficiently associated” organizations during a work week. If these organizations are “sufficiently associated” with respect to the worker’s employment, then the worker’s hours must be combined when calculating overtime pay. Under the new proposed rule, employers may be sufficiently associated when:
There is an arrangement between [the employers] to share the employee’s services;
One employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or
They share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer.
See Proposed Rule § 791.120: Determining Horizontal Joint Employment (page 131/136).
The Proposed Rule gives an example of a cook who works for 30 hours per week for one restaurant and 15 hours per week for another restaurant.[1] These two restaurants are owned by the same person, and they coordinate the cook’s work schedule to allow him to work interchangeably for the two restaurants for the same hourly rate. Because the two restaurants share common ownership and collaborated on the cook’s work schedule and hourly wage, they are joint employers, and they must therefore combine the cook’s total hours worked per week (45), entitling the cook to overtime pay. See Proposed Rule § 791.120: Determining Horizontal Joint Employment (page 132/136).
A vertical joint employment relationship, by contrast, involves an employee’s work in one position simultaneously benefitting two or more employers. The question, in his case, is whether the additional organizations are also considered an employer of the primary organization’s employee(s). This may be the case when the additional organization:
Has the power to hire and fire the employee(s),
Supervises and controls employee work schedules or conditions of employment,
Determines the rate and method of payment, and
Maintains the employee’s employment records (such as payment records).
These four factors derive from the Ninth Circuit case Bonnette v. California Health and Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983), and have been widely adopted in U.S. courts. These factors are non-exhaustive and are not dispositive, and whether the joint relationship exists depends on the totality of the circumstances. However, an affirmative finding on all four factors supports a strong likelihood that an employer is a joint employer.
The Context
1. 4th Circuit Test
Although many jurisdictions have used some variation of the Bonnette analysis, the Fourth Circuit (which covers Maryland, West Virginia, Virginia, and North Carolina) rejected this test in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017). The Salinas court reasoned, in part, that the Bonnette test focused too heavily on the relationship between the employee and the alleged joint employer, rather than the relationship between the joint employers themselves. The Fourth Circuit instead uses its own two-factor “not completely disassociated” test, finding that joint employment exists when:
Two or more persons or entities share, agree to allocate responsibility for, or otherwise codetermine—formally or informally, directly or indirectly—the essential terms and conditions of a worker's employment and
The two or more persons' or entities' combined influence over the terms and conditions of the worker's employment render the worker an employee as opposed to an independent contractor.
See Salinas v. Commercial Interiors, Inc., 848 F.3d 125, 151 [2] (4th Cir. 2017).
In conjunction with this two-factor test, the Fourth Circuit provided six factors lower courts should consider when analyzing joint employment:
Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;
Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to—directly or indirectly—hire or fire the worker or modify the terms or conditions of the worker's employment;
The degree of permanency and duration of the relationship between the putative joint employers;
Whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;
Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and
Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers' compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.
See Salinas v. Commercial Interiors, Inc., 848 F.3d 125, 141-42 (4th Cir. 2017).
These factors are non-exhaustive and are based on the totality of the circumstances. See Salinas, 848 F.3d at 142. This test applies to all employers within the Fourth Circuit.
2. DC Circuit
As noted in the new Proposed Rule, the D.C. Circuit has heavily relied on the Salinas test to determine joint employment in the 2024 case Mills v. Anadolu Agency, NA. Inc., 105 F.4th 388 (D.C. Cir. 2024). See Proposed Rule at Section III(D)(1) fn. 173 (page 42/136). In Mills, the D.C. Circuit developed a joint employment analysis in a case arising under D.C. Wage Payment and Collection Law, which defines “employment” according to the FLSA’s standards.
In the context of the NLRA, the D.C. Circuit has also endorsed a test from the Third Circuit case NLRB Browning-Ferris Industries, Inc., 691 F.2d 1117, 1123 (1982), which asks whether an employer "while contracting in good faith with an otherwise independent company, has retained for itself sufficient control of the terms and conditions of employment of the employees who are employed by the other employer.”
Details of the Proposed Rule
The DOL’s 2026 Proposed Rule closely mirrors the 2020 rule. Namely, the DOL offers a slightly modified version of the Bonnette test, asking whether the alleged joint employer:
Hires or fires the employee;
Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
Determines the employee’s rate and method of payment; and
Maintains the employee’s employment records.
This new test differs from the Bonnette test in two respects. First, the new test asks whether the employer actually hires or fires employees, as opposed to merely having the power to do so. Second, the Bonnette test did not contain the new “to a substantial degree” language. Additionally, like the other tests mentioned above, the factors are based on the totality of the circumstances, and no single factor is dispositive.
Other factors such as the alleged joint employer’s “reserved control” over an employee, such as its mere authority to supervise and fire employees, may be relevant, but the new analysis puts greater emphasis on whether the employer exercises this authority in practice. Additionally, the DOL states that an employee’s “economic dependence” on an employer—usually a question for determining whether a worker is an employee or contractor—has no bearing on whether a worker employed by a primary employer is also employed by a secondary employer.
Employer Takeaways:
Being classified as a joint employer can have significant legal consequences. Joint employers may be held jointly and severally liable for another employer’s FLSA, FMLA, and MSPA violations, even if the affected employee is not under the first employer’s payroll. Businesses that work with staffing agencies or contractors, for example, may be classified as joint employers. See Proposed Rule at Section III(C): Two Scenarios of FLSA Joint Employment (Proposed § 791.110) (page 33/136).
To avoid unexpected liability, employers should pay close attention to their level of control over another company’s employees, as well as the analyses used by local courts to determine joint employment. Ensure that “shared” employees are adequately tracking their combined weekly hours, and coordinate payroll practices with potential joint employers.
Employers who enter potential joint employer relationships with other companies should consider reviews, contractual indemnities and affirmations to verify and protect against the potential joint employer’s employment law compliance (or non-compliance). In other words, buyer beware -- do the due diligence and understand, on a granular level, the joint employer’s commitment to compliance, before accepting the risk of co-employment.
In case the Proposed Rule is challenged in court, employers should keep in mind that because the Supreme Court in Loper Bright Enterprises v. Raimondo, 144 U.S. S. Ct. 2244 (2024) overturned Chevron deference, courts may more heavily scrutinize the DOL’s interpretations of the law. Regardless, in addition to the Proposed Rule, employers should continue to comply with state and local employment law standards. Some states may use their own joint employer rule.
The Proposed Rule notes that Section 3(d) of the FLSA defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee,” and that Section 3(e) defines “employee” as any “individual employed by an employer.” See Proposed Rule at Section I(A) (page 4/136).
The National Labor Relations Board (NLRB) recently reinstated its 2020 joint employment rule, which classifies joint employers as employers who “possess and exercise such substantial direct and immediate control over one or more essential terms or conditions of their employment as would warrant finding that the entity meaningfully affects matters relating to the employment relationship with those employees.” See 29 C.F.R. § 103.40.
This Proposed Rule is not yet the law. If you are an employer who would like to submit a comment to the DOL, interested parties may do so before the notice-and-comment period ends on June 22, 2026, at 11:59 pm EST.
Questions? Contact us.
[1] Section III-E: Determining Horizontal Joint Employment (Proposed § 791.120)
[2] 848 F.3d 125
