Labor & Employment Law Daily Wrap Up, EXPERT INSIGHTS—DOL's joint employer proposal: what employers should watch now, (Jul 10, 2026)

Law Firms Mentioned:Ballard Spahr

Organizations Mentioned:Ballard Spahr, LLP | U.S. Department of Labor

By A.C. Estacio-Heilich, Shirley S. Lou-Magnuson, and Brian D. Pedrow of Ballard Spahr LLP

On April 22, 2026, the U.S. Department of Labor's Wage and Hour Division published a Notice of Proposed Rulemaking) that would revise the agency's analysis for assessing joint employer status under three federal wage and hour laws. The proposed rule would implement regulatory guidance for determining joint employer status under the Fair Labor Standards Act (FLSA) and amend existing regulations under the Family and Medical Leave Act (FMLA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA) so that the proposed FLSA analysis would apply under those laws as well. Because a joint-employer finding can create responsibility for another entity's workers, the proposal is significant for employers that rely on staffing companies, contractors, franchise models, agricultural labor contractors, PEOs, management-services companies, or affiliated entities.

Key Points

Unified Standard and Vertical Joint Employment. The proposed rule would restore FLSA joint-employer guidance at 29 CFR part 791 and use that analysis under the FMLA and MSPA as well. "Vertical" joint employment generally involves a worker who is on one business's payroll, such as a staffing agency or subcontractor, while performing work that benefits another business that may direct or control aspects of the job. For those relationships, the rule focuses on whether the potential joint employer:

Has the power to hire or fire the worker;
Supervises or controls the worker's schedule or conditions of employment to a substantial degree;
Determines the worker's rate and method of payment; and
Maintains the worker's employment records.

Reserved Control. The test would not be mechanical. Additional facts may matter, and all four factors pointing one way creates a substantial likelihood of joint employer status or non-status. DOL would also consider reserved control, but exercised control carries greater weight.

Horizontal Joint Employment. "Horizontal" joint employment generally involves the same employee working for two or more separate businesses in the same workweek, such as related businesses or businesses that coordinate employment decisions. The key question is whether the businesses are sufficiently connected with respect to that employee's job. Ordinary business ties, such as sharing a vendor or common franchisor, are not enough by themselves.

Steps for Employers to Consider Now

Map relationships and control points. Identify staffing, subcontracting, franchise, PEO, management-services, agricultural labor contractor, and affiliated-company arrangements, then note who hires, fires, schedules, directs work, sets pay, keeps records, and handles leave.
Align contracts with reality. Reserved rights to supervise, discipline, schedule, set pay, or control working conditions should reflect actual practice and be retained only where they serve a business need.
Reduce unnecessary day-to-day control. Route performance, attendance, scheduling, and discipline concerns through the contracting entity rather than managing another company's employees directly.
Update manager guidance. Train supervisors on when communications with contractor or staffing employees may create joint-employer arguments.

Congressional Pushback Already Underway

On June 22, 2026, House Democrats led by Rep. Bobby Scott (D-Va.) and Rep. Ilhan Omar (D-Minn.) sent a letter to acting Labor Secretary Keith Sonderling urging the DOL to withdraw the proposed rule. The lawmakers argue that by limiting who can be held responsible for federal labor law violations, the proposal would "shield larger businesses whose business model relies on subcontracting with thinly capitalized subcontractors or farm labor contractors that cut corners on federal labor law compliance." They further contend that the rule's weighting of certain factors over others "undermines the intent of a more holistic consideration of all factors that could establish joint employer liability." Although the proposal's comment period remains open, this letter signals that the rulemaking may face sustained political opposition, and potentially judicial challenge, making it all the more important for employers to monitor developments closely.

A.C. Estacio-Heilich, Shirley S. Lou-Magnuson and Brian D. Pedrow

Ballard Spahr LLP

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Philadelphia

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United States

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E-mail: fujimotoc@ballardspahr.com

URL: www.ballardspahr.com/

Attorneys: (Ballard Spahr).

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