May 4, 2026
Vertical joint employment describes an arrangement in which an employee “is jointly employed by two or more employers that simultaneously benefit from the employee’s work.” Vertical joint employment is determined by analyzing whether the potential joint employer:
The DOL emphasized that no single factor is dispositive in determining joint employer status under the FLSA and that the determination depends on all the facts in a particular case.
The proposed rule explains that this list of factors is not exhaustive and identifies additional less weighted considerations. The additional considerations may be used, but they cannot overcome an analysis of the four factors opting for joint employment or vice versa.
When considering vertical joint employment, it helps to picture a ladder. The top rung represents entities such as a prime contractor, manufacturer, retailer, franchisor, or staffing agency clients. The next rung includes contractors or subcontractors, vendors or suppliers, franchisees, and staffing agencies. The rung below represents the employee.
Horizontal joint employment generally involves situations in which an employee works separate hours for two or more joint employers during 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 DOL has found that the standard for horizontal joint employment is “longstanding and well-settled.” Accordingly, the DOL proposes a rule that substantively remains the same as the rule adopted in 2020.
Examples of where horizontal joint employment may apply include: (1) the employers have an arrangement to share the employee’s services; (2) one employer acts directly or indirectly in the interest of the other employer in relation to the employee; or (3) the employers share control of the employee—directly or indirectly—because one employer controls, is controlled by, or is under common control with the other.
More specific examples include a worker sharing time between related restaurants or shared staff in associated healthcare facilities.
The DOL further explains how several general business models and business practices do not make joint employer status more or less likely so courts should not give the stated business models and business practices weight when analyzing joint employment.
Unification with FMLA and MSPA
The proposed rule seeks to unify the joint employer analysis under the FMLA and MSPA with the FLSA. To do so, the respective Acts incorporate the FLSA’s joint employer standards into their regulations. With the joint employer rule applied to the FMLA and MSPA, employers must understand its impact. Being a joint employer could require compliance with these acts, even if it wasn't necessary before. This might happen if the joint employment relationship increases the employee count to meet the FMLA's 50-employee threshold or involves employees subject to the MSPA. If an employer is newly subject to the FMLA or MSPA due to a joint employment relationship, the employer should understand its obligations in complying with the acts.
What Can Employers Do Now?
As stated above, this is a proposed rule, and it will have to go through a comment period before ever becoming final. Interested persons will have until June 22, 2026, to comment on the proposed rule. Employers may submit comments on the rule.
Employers should evaluate their third-party relationships to determine if they qualify as joint employers under the proposed rule, whether by the horizontal or vertical standard. They should also review agreements and practices to assess if the agreements and practices exert enough control to establish joint employment.
The McGrath North Labor and Employment team will continue to monitor the development of this proposed joint employer rule. Please reach out with any questions or if you need additional guidance in determining a possible joint employment relationship with other entities.
Deciding Who's the Boss: The DOL Proposes New Joint Employer Rule
On April 22, 2026, the United States Department of Labor (“DOL”) announced a proposed rule regarding joint employer status under the Fair Labor Standards Act (“FLSA”), Family and Medical Leave Act (“FMLA”) and Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”). The purpose of the rule is to promote clarity and uniformity with the DOL’s enforcement of federal wage and hour law and to make the standard of determining joint employer status under the FMLA, and MSPA consistent with the FLSA.
The FLSA requires employers to pay employees at least the federal minimum wage and overtime for every hour worked over 40 in a workweek, unless the employee is exempt from such requirements. The FLSA also mandates that employers keep certain records regarding their employees. Under the FLSA, “employer” is defined to “include any person acting directly or indirectly in the interest of an employer in relation to an employee.” The broad definition of “employer” allows for employees to have “joint employers” who may be liable for wage and hour violations.
The DOL has provided interpretive guidance and regulations on determining joint employer status for decades. The DOL most recently implemented a rule in 2020; however, that rule was rescinded shortly thereafter in 2021. The proposed rule aims to clarify and guide employers on the two scenarios where they can be considered joint employers. The two scenarios are vertical joint employment and horizontal joint employment.
Vertical Joint Employment
Vertical joint employment describes an arrangement in which an employee “is jointly employed by two or more employers that simultaneously benefit from the employee’s work.” Vertical joint employment is determined by analyzing 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 proposed rule explains that this list of factors is not exhaustive and identifies additional less weighted considerations. The additional considerations may be used, but they cannot overcome an analysis of the four factors opting for joint employment or vice versa.
When considering vertical joint employment, it helps to picture a ladder. The top rung represents entities such as a prime contractor, manufacturer, retailer, franchisor, or staffing agency clients. The next rung includes contractors or subcontractors, vendors or suppliers, franchisees, and staffing agencies. The rung below represents the employee.
Horizontal Joint Employment
The DOL has found that the standard for horizontal joint employment is “longstanding and well-settled.” Accordingly, the DOL proposes a rule that substantively remains the same as the rule adopted in 2020.
Examples of where horizontal joint employment may apply include: (1) the employers have an arrangement to share the employee’s services; (2) one employer acts directly or indirectly in the interest of the other employer in relation to the employee; or (3) the employers share control of the employee—directly or indirectly—because one employer controls, is controlled by, or is under common control with the other.
More specific examples include a worker sharing time between related restaurants or shared staff in associated healthcare facilities.
The DOL further explains how several general business models and business practices do not make joint employer status more or less likely so courts should not give the stated business models and business practices weight when analyzing joint employment.
Unification with FMLA and MSPA
The proposed rule seeks to unify the joint employer analysis under the FMLA and MSPA with the FLSA. To do so, the respective Acts incorporate the FLSA’s joint employer standards into their regulations. With the joint employer rule applied to the FMLA and MSPA, employers must understand its impact. Being a joint employer could require compliance with these acts, even if it wasn't necessary before. This might happen if the joint employment relationship increases the employee count to meet the FMLA's 50-employee threshold or involves employees subject to the MSPA. If an employer is newly subject to the FMLA or MSPA due to a joint employment relationship, the employer should understand its obligations in complying with the acts.
What Can Employers Do Now?
As stated above, this is a proposed rule, and it will have to go through a comment period before ever becoming final. Interested persons will have until June 22, 2026, to comment on the proposed rule. Employers may submit comments on the rule.
Employers should evaluate their third-party relationships to determine if they qualify as joint employers under the proposed rule, whether by the horizontal or vertical standard. They should also review agreements and practices to assess if the agreements and practices exert enough control to establish joint employment.
The McGrath North Labor and Employment team will continue to monitor the development of this proposed joint employer rule. Please reach out with any questions or if you need additional guidance in determining a possible joint employment relationship with other entities.
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