DOL Proposes New Joint Employer Rule — What Staffing Firms and Multi-Entity Employers Must Assess Now

What the NPRM Proposes

On April 22, 2026, the Department of Labor's Wage and Hour Division (WHD) announced a Notice of Proposed Rulemaking that would establish a single national standard for determining when two or more employers share legal responsibility for the same employees under three federal statutes: the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).

The proposed rule fills a regulatory void that has existed since the DOL rescinded the 2020 joint employer rule in 2021, following a federal court ruling that the 2020 rule violated the Administrative Procedure Act. Since then, federal courts have applied divergent standards across circuits, creating inconsistent compliance obligations for multi-state employers. The proposed rule is designed to resolve that circuit split and create a nationally uniform framework.

The Four-Factor Test for Vertical Joint Employment

The most common joint employment scenario in payroll and staffing contexts is vertical joint employment — where one employer directly employs and pays the worker, but another employer benefits from the worker's services. Staffing agency placements are the clearest example. The proposed rule establishes four factors that courts and WHD investigators would use to evaluate whether vertical joint employer status exists:

No single factor is dispositive — all four are weighed together based on the totality of the relationship. The proposed rule emphasizes that actual exercise of control is more relevant to the analysis than a party's reserved right to control. A staffing client that regularly directs workers' daily tasks, approves schedule changes, and maintains its own timekeeping records faces significantly higher joint employer exposure than one that simply sets broad performance requirements.

Horizontal Joint Employment

The proposed rule also addresses horizontal joint employment — where two separate employers that are associated or related both employ the same worker simultaneously. This scenario arises most commonly when employees split shifts between entities under common ownership (such as related restaurant brands or franchise groups). The proposed rule applies a simpler standard here: if the employers are sufficiently associated — through common ownership, management, or operational overlap — they may be found to be horizontal joint employers sharing liability for all hours worked.

FMLA and MSPA Coverage

Beyond the FLSA wage and overtime implications, the proposed rule incorporates the same joint employer analysis into regulations implementing the FMLA and MSPA. This means that if a staffing agency and its client are found to be joint employers, both may be responsible for FMLA leave eligibility determinations and leave entitlements. A worker who has split time between a staffing agency and a client company may be entitled to FMLA leave based on combined employment counts — even if neither employer alone meets the FMLA's 50-employee threshold.

What This Means for Payroll Operations

For payroll teams at staffing agencies, outsourcing firms, and multi-entity employers, the proposed rule has direct operational implications across several areas:

Action Checklist