May 2026 | Client Alert
The U.S. Department of Labor (DOL) has issued a Notice of Proposed Rulemaking (NPRM) that would establish a uniform and comprehensive standard for determining 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).
Under the proposed rule, the DOL would adopt a unified approach across all three statutes, recognizing that each shares the same definition of “employ.” As a result, the finding of joint employer status under one law will likely apply across the others, expanding potential exposure beyond wage and hour liability to include leave obligations and agricultural worker protections.
The rule distinguishes between two primary scenarios: Horizontal joint employment and Vertical joint employment.
Horizontal joint employment applies where an employee works for two or more employers in the same workweek. If those employers are acting independently and are fully disassociated, each may treat the hours separately. However, when they are sufficiently associated, (such as when they share employees, act in each other’s interest, or share control [including through common ownership]), they must aggregate hours worked for compliance purposes. This determination is based on the totality of the circumstances.
Vertical joint employment, by contrast, arises in arrangements such as staffing or subcontracting, where a worker is formally employed by one entity but performs work for another that benefits from that labor.
To assess vertical joint employment, the DOL proposes a four-factor test focusing on whether (1) the potential joint employer hires or fires the employee; (2) supervises or controls working conditions; (3) determines pay; and (4) maintains employment records. This analysis is not mechanical, but rather a holistic evaluation of the entire relationship.
The proposed rule clarifies that both contractual authority and actual practices are relevant, but that actual exercise of control carries greater weight than theoretical or reserved authority. It also recognizes indirect control, such as when an entity directs another employer to take action affecting a worker, while making clear that mere suggestions or recommendations are insufficient.
Even under the proposed rule, the implications of a joint-employment determination are significant. Under the FLSA, joint employers must aggregate hours worked and share responsibility for complying with minimum wage and overtime requirements. Under the FMLA, joint employers are counted for coverage and eligibility purposes, although a “primary employer” is responsible for administering leave and benefits. Under the MSPA, joint employers share responsibility for wage, disclosure, and recordkeeping obligations. Where joint employment exists, entities are jointly and severally liable, meaning an employee may recover the full amount of damages from any one employer.
Even though Puerto Rico does not have a defined standard for determining who is considered a joint employer in Puerto Rico, there are alternative federal standards through which it can be determined. Both Title VII of the Civil Rights Act of 1964 (Title VII) and the National Labor Relations Act (NLRA) have analyses to determine joint-employment status that are similar to the standard proposed by the DOL.
Under Title VII, the analysis focuses on whether two or more entities share or co-determine the essential terms and conditions of employment for a particular employee. The key points of the analysis include the authority such employer has over hiring, firing, discipline, supervision, pay, insurance, records and other terms and conditions of employment. Nonetheless, to determine joint employer status under Title VII, courts conduct a fact-specific inquiry into the degree of control and supervision exercised by the putative joint employer over the employee, considering a range of factors rooted in the common law of agency and the economic realities of the relationship. The analysis is flexible, with no single factor being determinative, and is guided primarily by the extent of control over the essential terms and conditions of employment.
Similarly, the NLRA’s joint-employer test is rooted in common law agency principles, focusing on the right to control and the actual exercise of control over essential employment terms. All in all, under the NLRA, the joint employer analysis requires a showing that an entity possesses and exercises substantial direct and immediate control over essential terms and conditions of employment of another employer’s employees, with indirect or reserved control considered only as supplemental evidence, and the determination is made based on the totality of the circumstances in each case. Indirect or reserved control encompasses contractually reserved authority that is never exercised yet may be considered, but only as supplemental to direct and immediate control.
For employers, this signals the need for closer scrutiny of staffing, subcontracting, and affiliated business relationships, especially where direct or indirect control over workers may be present.
The DOL is accepting public comments regarding this proposal through June 22, 2026 (11:59 p.m. ET). Employers should consider reviewing their current structures and submitting comments where appropriate.
O’Neill & Borges LLC is currently monitoring developments and is available to help employers assess how this proposal may impact their operations or compliance strategies.
This O’Neill & Borges Client Alert is prepared for general information purposes only. It does not constitute legal advice or a legal opinion; nor does it establish an attorney-client relation with the recipient. For further information or to establish an attorney-client relation please contact us at info@oneillborges.com or your prime contact attorney at O&B.