Joint Employer Rule Coming from DOJ Requires Deliberate Action in Setting Evidence Rather than Napkin Contracting

The US Department of Labor recently proposed a rule, which if adopted, will increase the possibility that two distinct companies are determined to be a joint employer with respect to claims under the FLSA (wages/overtime), FMLA (leave), and MSPA (seasonal work). 

The DOL’s proposal provides two ways joint employment can be established:

1. Vertical Joint Employment: two or more employers benefit simultaneously from an employee’s work.
2. Horizontal Joint Employment: an employee works separate hours for "sufficiently associated" employers.

The DOL’s factors for determining vertical joint employment include:

1. Whether the person/entity hires or fires the employee
2. Whether the person/entity substantially supervises or controls the employee’s work schedule or conditions of employment 
3. Whether the person/entity determines the employee’s rate and method of employment
4. Whether the person/entity maintains employee’s employment records

DOL’s factors for determining horizontal joint employment include:

1. Whether an employer acts, directly or indirectly, in the interest of another employer
2. Whether there is an arrangement between employers to interchange employees
3. Whether one employer controls or is controlled by another employer, or is under common control with another employer

Businesses can submit comments until June 22, 2026 by two methods where the proposed rule should be identified by Regulatory Information Number (RIN) 1235-AA48:

• Electronic Comments: Submit comments through the Federal eRulemaking Portal at https://www.regulations.gov. Follow the instructions for submitting comments.
• Mail: Address written submissions to: Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210.

Should this be adopted, employment contracts and policy manuals are going to be the evidence needed to defend yourself from being named on a related entities wrong. This is not a time to napkin contract if you want to avoid great exposure. 

When wage and hour, leave, or seasonal worker claims expand into disputes over joint employer liability, the exposure can quickly spread across affiliated entities, ownership groups, management companies, and related businesses.

Lieb at Law, P.C. litigates complex employment disputes involving FLSA, FMLA, misclassification, and joint employer claims, while helping businesses build defensible agreements and operational structures before litigation begins.

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