On April 23, 2026, the U.S. Department of Labor (DOL) published its proposed rule setting the standard for when two or more employers may be considered “joint employers” under three federal laws — the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
This is an important standard for employers to consider when it comes to their business relationships because when two entities are determined to be joint employers, they can be held jointly responsible for legal violations, such as meal and rest break violations or failing to pay minimum wage or overtime.
The DOL’s New Rule
If the new DOL rule looks familiar, it’s because it generally mirrors the last joint-employer rule published in 2020. When challenged in court, a judge concluded that the 2020 rule violated the Administrative Procedure Act, and in 2021, the DOL ultimately rescinded it. In its new rule, the DOL tries to address the court’s concerns with the previous rule and create a uniform joint-employer standard under multiple federal statutes.
The proposed rule recognizes two types of joint employment:
- Vertical joint employment: In this more common scenario, an employee is jointly employed by two or more employers that simultaneously benefit from the work. A staffing company is one example.
- Horizontal joint employment: In this less common scenario, an employee works separate hours for two or more employers in the same workweek, and the employers are “sufficiently associated” with each other to be joint employers.
For vertical joint employment, the proposed rule creates a four-factor balancing test focused on whether the potential joint employer exercises substantial control over the terms and conditions of the employee’s work. The factors are whether the potential 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.
The determination doesn’t hinge on a single factor but is made based on “all of the facts in a particular case.” While these factors carry the most weight, the proposed rule identifies other relevant factors, including the potential joint employer’s right or ability to control the employee, even if they don’t actually exercise that control. This is one difference between the current proposed rule and the 2020 rule, which required an employer to actually exercise control, directly or indirectly, over one or more of the factors listed above.
Other relevant factors may include whether the joint employer exercises significant control over other terms and conditions of employment, other than those listed in the four main factors, and whether the employee is economically dependent on the potential joint employer. These, however, are less important than the four main factors listed above.
To determine horizontal joint employment, the proposed rule states that employers will be “sufficiently associated” if:
- They have an arrangement between them 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.
The proposed rule is open for comment for 60 days. Afterward, the DOL will review the comments and issue a final rule, which may or may not reflect changes made based on comments.
What California Employers Should Know
Employers covered by the FLSA, FMLA and MSPA should carefully review the proposed rule and its potential impact on their business relationships. California employers, however, should remember that the state has its own set of joint-employer rules that are generally broader and more protective of workers than the federal law.
Under California wage-and-hour law, the Industrial Welfare Commission and the California Supreme Court adopted a broad joint-employer definition that not only focuses on the employer’s exercise of control over wages, hours and working conditions, but also encompasses situations in which the potential joint employer knows of and fails to prevent work from occurring.
Additionally, specific California statutes impose strict joint-employer liability on businesses using staffing agencies or other labor contractors, regardless of who exercises control. For example, California Labor Code section 2810.3 holds companies accountable for wage-and-hour violations when they use staffing agencies, or other labor contractors, to supply workers.
California also has its own joint-employer standard under the California Family Rights Act (CFRA), the state’s equivalent to the FMLA. CFRA regulations state that the determination isn’t based on any single factor but rather “the entire relationship must be viewed in its totality based on the economic realities of the situation.” If an employee performs work benefiting two or more employers, or works for two or more employers at different times during the workweek, that is generally enough to establish a joint employment relationship in situations such as:
- Where employers have an arrangement to share an employee’s services or to exchange employees;
- Where one employer acts directly or indirectly in the interest of the other employer in relation to the employee; or
- Where the employers are not completely disassociated with respect to the employee’s employment and may be deemed to share control of the employee, directly or indirectly, because one employer controls, is controlled by or is under common control with the other employer (2 CCR sec. 11087(d)(3).).
California employers should consult with legal counsel if they have any questions about how the DOL’s rule may impact their specific practices, especially if they have offices or employees that operate out of state.
James W. Ward, J.D., Employment Law Subject Matter Expert/Legal Writer and Editor, CalChamber
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