Although political fighting is at an all-time high in Washington DC, both parties are in agreement with tackling the joint employer conundrum.  The Department of Labor promulgated its proposed rule for joint employment. The regulation, titled Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act and Migrant and Seasonal Agricultural Worker Protection Act, contains guidance for when "horizontal" joint employment exists and four factors for determining "vertical" joint employment.

The rule is similar to the first Trump administration’s joint employer rule, which was invalidated by the New York District Court.

The new rule, about 150 pages long, tries to overcome objections from the U.S. Supreme Court’s 2024 Looper Bright decision that invalidated the former Chevron Rule that courts should no longer defer to federal agencies' interpretations of ambiguous statutes.  "What I think you see over about 150 pages is the department trying its best and doing a good job of divining from a bunch of different court decisions over almost 100 years with divergent takes and divergent tests, what is the best answer as for who is a joint employer in the country and who is not?" Dave Dorey of management-side firm Fisher Phillips LLP, who worked under the solicitor of labor during the first Trump administration, said.

The highlights of the rule are as follows:

• Proposed § 791.105(a) addresses, as a general matter, who or what constitutes an employer under the Act, explaining that an “employer or joint employer may be an individual, partnership, association, corporation, business trust, legal representative, public agency, or any organized group of persons, excluding any labor organization (other than when acting as an employer) or anyone acting in the capacity of officer or agent of such a labor organization.”  It is a very broad definition of employer.
• Proposed § 791.105(c) explains that FLSA joint employment exists only among and between two or more employers that are separate entities—“[f]or there to be joint employment, each employer must exist as a separate entity.”  The question is when there is common ownership or the relationship between the control of the organizations is vague and unclear.
• Proposed § 791.110 addresses the related concepts of “vertical” and “horizontal” joint employment, using plain language to the extent possible, so these scenarios are generally understandable to a significant portion of small business owners and employees.  The DOL will use “vertical” and/or “horizontal” analysis to determine the relationship between the various employers.
• Proposed § 791.110(a) describes vertical joint employment generally as an arrangement in which an employee “is jointly employed by two or more employers that simultaneously benefit from the employee's work.”
• Proposed § 791.110(b), described horizontal joint employment as generally involving situations in which an employee works separate hours for two or more joint 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.” The proposed subsection explains that, in a typical horizontal joint employment situation, “it is undisputed that each employer employs the employee for some hours worked, and the issue is whether the employers are sufficiently associated with each other with respect to the employment of the employee.” 

To determine vertical joint employment, the proposed rules use a four factor test:

• (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; and
• (4) maintains the employee's employment records.

Per the DOL, the four factors identified in proposed § 791.115(a) weigh the economic reality of the potential joint employer's control, direct or indirect, over the employee and would provide needed clarity and uniformity to the determination.

Per the DOL, to determine horizontal joint employment, the analysis centers on the employers' relationship.  In these circumstances, focusing on the employee would not be probative of the relationship between the employers; instead, analyzing the association (or lack thereof) between the employers is indicative of whether they jointly employ the employee and, therefore, must aggregate the hours worked by the employee for each of them.  If this relationship is deemed horizontal, failure to pay overtime would be a violation of the law, as well as not providing FMLA or other benefits, when all employees of a horizontal relationship are combined theoretically into a control organization.

For smaller employers who have multiple businesses and use employees from one business to work in another, regardless of separate payrolls and the like, the DOL will review the totality of the circumstances to determine the reality of the situation.  All employers who use temporary workers should have policy in place that the temporary agency controls the workforce from hiring to performance discussions to termination, although the contracting employer may conduct training and control over time that work must be performed. 

Note that these are proposed rules will apply to all laws within the U.S. DOL, including wage and hour, FMLA, and more.  It will be open for public comment for 60 days (through June 22, 2026).  HR should conduct a review of their workforce with legal counsel to make sure that they are not violative of standards set forth in the proposed regulation.

Source: Law360 4/22/26