New England Biz Law Update
The U.S. Department of Labor has taken a step toward revising its joint employer standard, sending a proposed rule to the White House Office of Management and Budget for review.
Details of the proposal have not yet been released. But based on the agency’s regulatory agenda and early commentary, the rule is expected to narrow when two businesses can be considered joint employers under federal wage and leave laws.
Joint employer status matters because it determines when multiple entities share legal responsibility for compliance with laws such as the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA).
A return to ‘direct control’
The DOL’s approach to joint employment has shifted several times over the past decade. Earlier rules focused more heavily on whether a business actually exercised control over workers, while more recent interpretations allowed for broader findings based on indirect or potential control.
The forthcoming proposal is expected to move back toward a narrower standard. Early indications suggest the rule will emphasize whether a company exercises direct and immediate control over key aspects of employment — such as hiring, pay, scheduling, and supervision — while placing less weight on theoretical or contractual control that is not actually used.
That approach would align more closely with the National Labor Relations Board’s recently finalized joint employer rule, which similarly limits liability to situations involving substantial, exercised control.
The impact could be particularly relevant in “vertical” employment relationships, where workers are employed by one company but perform work for another, such as staffing, subcontracting, or franchise arrangements.
The rule is still in the proposal stage and will go through the federal notice-and-comment process before it can take effect. Legal challenges are also possible.
