The U.S. Department of Labor is stirring the pot again with a proposed joint employer rule which aims to provide clarity on a slew of matters. The rule is supposed to bring a single, nationwide standard across major laws like FLSA, FMLA, and MSPA.
The move could bring harmony by finally putting everyone on the same page.
What’s brewing and why does it matter?
The DOL’s joint employer status is where the buck finally ends for wages, overtime and worker protections. If two employers are deemed joint employers, they are in the same boat when it comes to liability. This rule could redraw the lines for franchises, staffing firms, gig platforms, and American subcontractors.
What remains unanswered is: who will be held responsible when things go south?
The joint employer rule by DOL tries to answer some questions.
The four-factor test
The rule’s backbone will be a four-factor test:
- Who hires or fires?
- Who calls the shots on workers’ schedules and working conditions?
- Who writes the paycheck?
- Who keeps the records?
If all four factors point on way, it means there’s a substantial likelihood of joint employment.
The current proposal is similar to the one that made the rumor rounds in 2020. The earlier rule was struck down before a court challenge. The current proposal will aim to balance employer flexibility with greater worker protection.
The DOL’s proposed joint employer rule emphasizes on economic reality, so it’s not just about what’s written on paper, but who ultimately pulls the strong. In this case, actual control matters more than theoretical control. So, if you act like a boss, you might be treated like one.
The rule also distinguishes between:
Horizontal employment: Employers linked like branches of the same tree.
Vertical employment: Layers of control, i.e., contractor -> subcontractor -> worker.
Not every employer will pass this test as being in the same ecosystem won’t cut it.
How will DOL’s proposed joint employer rule impact companies?
Employers may need to tighten their belts and review contracts with vendors, partners and franchisees. Now may be a good time to ask: are you holding the reins too tightly?
The proposed joint employer rule by DOL could greatly reduce compliance chaos and help force companies to rethink how much control they exert.
Supporters argue the joint employer rule will help employers reduce the cost of litigation. However, critics argue that it could let some employers off the hook, potentially undermining worker protections. At the end of the day, it’s a tug-of-war between business flexibility and worker security.
The DOL’s joint employer proposal is open for public comment until June 22, 2026. After that, the final rule could land later this year.
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