On April 22, 2026, the U.S. Department of Labor proposed regulations addressing joint employer status under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. The Department said the proposal was intended to create a clearer nationwide standard where federal appellate courts have applied differing approaches.
The proposal's 60-day public comment period closed on June 22, 2026. As of July 19, 2026, the Department's published material describes the action as a proposed rule, not a final rule. Employers and workers should therefore distinguish between the proposal and currently binding law.
Why joint employment affects overtime
Under the FLSA, one employee can have more than one employer for the same work. When two entities are joint employers, they may be jointly and severally liable for minimum wages, overtime premiums, damages, and other relief.
Joint employment can also require hours to be combined. If an employee works 25 hours for one joint employer and 20 hours for another during the same workweek, treating the jobs as unrelated could hide five overtime hours. If the entities are joint employers, the employee's combined 45 hours may trigger overtime.
Vertical joint employment
Vertical joint employment commonly involves an intermediary. Examples include:
- A warehouse using workers supplied by a staffing agency
- A hotel using a housekeeping contractor
- A construction company using labor supplied by a subcontractor
- A healthcare facility using workers supplied by an agency
- A farm using a farm labor contractor
The proposed analysis focuses on whether the potential joint employer has sufficient control over the employee's work. Relevant facts may include hiring or firing authority, supervision, scheduling, setting pay, maintaining records, controlling work rules, or exercising other meaningful employment authority.
Horizontal joint employment
Horizontal joint employment can arise when an employee works for two nominally separate employers that are sufficiently associated with respect to that employee's employment.
Examples can include restaurants with common ownership, related healthcare locations, or businesses that coordinate schedules and payroll. The Department's proposal states that merely sharing a vendor or being franchisees of the same franchisor would not, by itself, establish horizontal joint employment.
Franchises are not automatically joint employers
A franchise relationship alone does not automatically make the franchisor responsible for every wage violation committed by a franchisee. The analysis turns on the actual employment relationship and the relevant legal factors.
Brand standards, product specifications, and general quality-control requirements may differ from direct control over hiring, firing, scheduling, pay, discipline, and daily work. Businesses should document which entity performs each employment function.
Staffing-agency example
Assume a worker is hired and paid by a staffing agency but works entirely at a manufacturer's facility. The manufacturer assigns daily tasks, controls the schedule, approves overtime, supervises performance, and can request that the worker be removed.
The agency may be an employer because it hired and pays the worker. The manufacturer may also be an employer because of its control over the work. If both are joint employers, both may be responsible for ensuring that all hours are recorded and overtime is correctly paid.
Hours worked for related businesses
A recurring overtime problem occurs when related locations place the same employee on separate payrolls. A worker may receive two checks showing fewer than 40 hours on each, even though the combined work exceeds 40 hours.
Separate legal names, payroll accounts, or tax identification numbers do not end the analysis. The relationship among the businesses and their control over the employee matter.
What workers should document
- Who recruited and hired them
- Who controls the schedule
- Who assigns and supervises work
- Who determines the rate of pay
- Which entity maintains time records
- Whether hours at multiple locations are combined
- Who has authority to discipline or remove them
What businesses should review
- Staffing, subcontracting, franchise, and management agreements
- Actual practices rather than contractual language alone
- Timekeeping across related locations
- Responsibility for approving and paying overtime
- Record-sharing procedures
- Indemnity clauses, insurance, and audit rights
- Training for managers who direct another company's workers
Joint and several liability
If joint employment exists, a worker may be able to recover the full amount owed from either responsible employer, subject to applicable law. The employers may later allocate costs between themselves, but their private agreement generally does not remove the worker's statutory rights.
Frequently Asked Questions
Is the 2026 joint employer proposal final?
As of July 19, 2026, the Department's official materials identify it as a proposed rule. The comment period closed June 22, 2026.
Can hours at two companies be combined for overtime?
Yes, when the companies are joint employers or when another rule requires aggregation. The answer depends on the relationship and actual practices.
Are staffing agencies always joint employers with clients?
No. Joint employment is fact-specific. A client's control over hiring, scheduling, supervision, pay, records, and working conditions can be important.
Is a franchisor automatically liable for a franchisee's overtime?
No. The franchise relationship alone is insufficient. The analysis focuses on the employment relationship and relevant control factors.
Can a contract say that only one company is the employer?
A contract can allocate responsibilities, but labels do not necessarily control the FLSA analysis. Actual economic and employment realities matter.
Official Sources
- U.S. Department of Labor — April 22, 2026 proposed rule announcement
- Wage and Hour Division — Joint Employer NPRM information
This article discusses a proposed federal rule and general FLSA principles. It is not legal advice, and the proposal may be changed, withdrawn, or finalized after publication.
This calculator is for educational purposes only. Consult your employer or a labor attorney for advice specific to your situation.