The U.S. Department of Labor has unveiled a proposed rule aimed at clarifying joint employer standards, a move that could significantly impact construction firms, subcontractors and labor relationships across the country.
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Announced by the department’s Wage and Hour Division on April 23, the proposal seeks to establish a uniform standard for determining joint employer status under key federal laws, including the Fair Labor Standards Act, the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act.
According to the agency, the rule would create “a single nationwide standard that both derives from commonalities in federal court precedent where available and resolves significant differences among the circuit courts where they exist,” ensuring “employees and employers have a clear, consistent understanding of when multiple employers are jointly responsible for protecting the wages and other rights of an employee.”
Acting Secretary of Labor Keith Sonderling said the proposal is designed to reduce regulatory confusion and support business growth. “A clear standard on joint employment would give businesses more confidence to invest in partnerships, help employees understand their rights, and make the department’s investigations more efficient,” he said.
Joint employer regulations come into play when a worker is employed by or benefits from more than one employer, particularly when multiple entities exert control over employment conditions. This is a common scenario in the construction industry, where general contractors, subcontractors and staffing firms frequently collaborate on projects.
The proposed rule builds on previous frameworks, including a four-factor test that evaluates whether an employer hires or fires workers, supervises schedules or working conditions, determines pay rates and maintains employment records.
While this four-factor analysis remains central to determining vertical joint employment, the Department of Labor noted that “a unanimous finding on the four factors in either direction would establish a ‘substantial likelihood’ regarding whether an individual or entity is a joint employer with another.”
The rule also addresses horizontal joint employment, clarifying that it “exists when separate employers are sufficiently associated with respect to the employment of the same employee,” while emphasizing that limited business relationships — such as sharing a vendor or operating under the same franchise — are not enough on their own to establish joint employer status.
The new proposal marks another shift in federal policy following years of regulatory changes. The Department of Labor last revised its joint employer rule in 2021, when the Biden administration rescinded an earlier Trump-era regulation.
Officials noted that the current proposal differs from the 2020 rule by removing language requiring actual exercise of control in all cases. Instead, it introduces more nuanced guidance, stating that exercised control carries greater weight than control that is merely reserved but rarely used.
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Wage and Hour Division Administrator Andrew Rogers emphasized the need for clarity amid conflicting court rulings. “The rule we propose today would deliver much-needed regulatory clarity in the face of divergent judicial precedent throughout federal courts of appeals,” Rogers said. “The proposal would also reduce compliance and litigation costs for employers while helping Wage and Hour Division investigators identify what is and is not a joint employment relationship.”
Notably, the proposal does not address joint employment under the National Labor Relations Act, also known as the Wagner Act, officials confirmed during a press briefing.
The Department of Labor is accepting public comments on the proposed rule for 60 days, with the deadline set for June 22 at 11:59 p.m. EDT.
The announcement follows leadership changes within the agency, coming shortly after the resignation of former Secretary of Labor Lori Chavez-DeRemer. Both Chavez-DeRemer and Sonderling had previously indicated plans to revisit joint employer standards.
For construction stakeholders, the outcome of this rulemaking process could reshape how partnerships are structured, how risk is allocated and how compliance obligations are managed across complex project teams.
Originally reported by Ginger Christ, Editor in Construction Dive.
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