If your business uses staffing firms, contractors, or consulting partners, you may soon be legally on the hook for their workers' wages, even if you never signed their paycheck. The Department of Labor's newly proposed joint employer rule would replace today's patchwork of inconsistent court standards with one nationwide test, applied uniformly across the FLSA, FMLA, and MSPA. That means less geographic gray area, and more direct exposure for organizations with layered workforces.
Big changes are coming: The U.S. Department of Labor is setting a nationwide joint employer standard. If your organization uses contractors, staffing firms, or consulting firms, you need to speak up
On April 22, 2026, the U.S. Department of Labor's Wage and Hour Division announced a proposed rule to clarify when two or more companies share legal responsibility for the same employee, a concept known as joint employer status. This means that when a joint employment relationship exists, both employers become jointly liable for all wages, overtime, damages, and other relief owed to that worker, regardless of which employer managed day-to-day work.
The proposal would establish a single nationwide standard under three federal laws: the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Today, courts across the country apply these tests inconsistently, creating a compliance nightmare for multi-state employers (organizations that have employees or business operations in more than one state).
Businesses and workers have 60 days after June 22 to weigh in before the rule moves toward finalization.
Why Should You Care?
The modern workforce is deeply layered. Organizations routinely hire through staffing agencies, rely on independent contractors, consulting firms, and structure operations through outsource third-party vendors. Each of those arrangements can create a joint employment relationship.
Until now, whether you were exposed depended heavily on which federal circuit you operate in. The proposed rule would eliminate that geographic lottery and replace it with a consistent, unified test derived from existing federal case law.
Acting Labor Secretary Keith Sonderling framed the change as pro-business clarity: "A clear standard on joint employment would give businesses more confidence to invest in partnerships." But it also means fewer gray areas to hide behind.
What Organizations Need to Know
This isn't just a regulatory update to file. It's a signal that the DOL is actively reshaping its view of complex employment arrangements. Here are the important things to understand:
Liability follows the work, not the contract
Joint employer status is determined by the economic reality of the working relationship, not what your contract says. If your business exercises meaningful control over a worker's schedule, pay rate, or working conditions (even indirectly), you may share liability for that worker's wages and benefits.
Alignment across three laws is a bigger deal than it sounds
Previously, FLSA, FMLA, and MSPA used different frameworks for evaluating joint employment. Aligning them means a finding of joint employer status under one law is more likely to carry over to the others. A wage claim can now more easily cascade into an FMLA leave dispute.
The staffing industry is on the front line
Organizations that use temporary staffing agencies should pay close attention. Under joint employer doctrine, the client company, not just the agency, can be held responsible for ensuring minimum wage compliance, overtime pay, and other FLSA protections for those workers.
The Risks of Inaction
If your organization hasn't audited its third-party and contractor relationships recently, now is the time. Here's what's at stake:
Financial: Back wages and damages
Joint employers are liable for unpaid wages and overtime going back up to three years under FLSA. For every affected worker.
Legal: Cascading claims
A single wage investigation can now trigger FMLA and MSPA liability simultaneously, multiplying legal exposure.
Operational: Vendor relationships
Contracts with staffing firms and service providers may need to be restructured to clearly define who controls what.
Reputational: Public investigations
WHD investigations are public record. Being named as a joint employer in a wage theft case carries lasting brand damage.
The comment period has closed. Here's what comes next.
The public comment period on the proposed joint employer rule closed June 22. Businesses with complex workforce structures, particularly those using staffing agencies, contractors, or consulting firms, should now shift focus from advocacy to preparation. Whether or not you submitted comments, the rule (or a revised version) may still move toward finalization, and readiness matters more than input at this stage.
- Review the proposed rule text and assess how it would apply to your current arrangements.
- Consult with employment counsel to identify any gaps in wage and hour compliance across your extended workforce.
- Monitor the DOL's rulemaking timeline for when a final rule may be published.
- Audit payroll data and classification decisions now, before enforcement begins. The DOL's PAID program allows employers to self-report and resolve potential violations before they become formal investigations.
The cleanest fix: an Employer of Record
Rules like this one exist because the line between "your worker" and "their worker" is genuinely blurry in modern workforce arrangements. An Employer of Record (EOR) eliminates that ambiguity, not by rewriting contracts, but by legally becoming the employer of your extended workforce.
When you engage workers through an EOR, the EOR assumes full legal employment responsibility: payroll, tax withholding, benefits administration, compliance with wage and hour laws, and liability under the FLSA, FMLA, and MSPA. Your company retains day-to-day direction of the work, and the EOR holds the legal relationship.
Under the DOL's proposed joint employer standard, the question is always: who controls the economic reality of the worker's employment? With an EOR in place, that answer is unambiguous. The EOR is the employer of record in every legal sense, and your company is clearly the client, not a co-employer exposed to joint and several liability.
If you want to know more about how myBasePay’s EOR protects organizations and your workers, please visit mybasepay.com.