Key Takeaways

• Harder to prove joint employment: The DOL’s proposed rule raises the threshold for finding joint employer status under the FLSA and FMLA.
• New, clearer standards: A four‑factor test focuses on actual control, pay decisions, and hiring/firing, with separate guidance for related companies.
• Common arrangements protected: Franchising, brand standards, and routine compliance requirements alone would not create joint employment.

Last week, the Department of Labor (DOL) proposed a new test for determining whether joint employment exists under the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA). Under the FLSA, joint employers are equally responsible for any failure to pay overtime or minimum wages. Under the FMLA, joint employers have shared obligations as well.

The new test, if adopted, would set a higher bar, essentially making it harder to prove the existence of a joint employment relationship under the FLSA or the FMLA.

Joint employment comes in two flavors: vertical and horizontal. The proposed rule addresses both types.

Vertical Joint Employment (unrelated companies)

Vertical joint employment can arise when the W-2 employees of one company are providing services for the benefit of a second, unrelated company. The second company could be deemed a joint employer if it meets the applicable joint employment test.

The FLSA and FMLA statutes contain no test for joint employment. Courts have adopted different versions of a multifactor...

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