The “New” Joint Employer Rule: Don’t Be Held Responsible for a Partner’s Mistake

Article by: Nicholas Hopkins, Associate

If your business relies on staffing agencies, subcontractors, or vendors, you may be a “joint employer” of workers you didn’t hire.

In practical terms, joint employer status determines when your company becomes legally responsible for another company’s workforce. A new proposed rule from the Department of Labor clarifies that this risk is driven by the degree to which your business shapes, or has the authority to shape, a worker’s day-to-day work conditions.

What Is a “Joint Employer” Relationship?

A “joint employer” is a business that is treated as an employer of a worker due to its effective control over the employment relationship, even though another company formally hired and pays the worker. This most often arises in staffing, subcontracting, and vendor arrangements, where one entity supplies labor and another directs the work. If your business meaningfully influences hiring, supervision, pay, or working conditions, you may be deemed the joint employer, even if they are technically on another company’s payroll.

The consequences of this classification are significant. When two businesses are joint employers, they are jointly and severally liable for compliance with wage-and-hour laws. In practice, that means you can be responsible for the full amount of unpaid wages, overtime, or other violations even if another company caused the issue.

The Proposed Rule’s “New” Joint Employer Test: Control Drives the Analysis

DOL’s new proposed rule largely returns to a structured four-factor test, but with important refinements. Since the 2020 iteration of this rule was struck down, courts across the country have been grappling with fact-specific tests to resolve joint employer disputes. This has led to a patchwork of unpredictable joint employer standards which varied on a state-to-state basis. The new rule seeks to restore a uniform approach.

Under the proposed rule, joint employer status, particularly for basic staffing and subcontracting arrangements, will be evaluated using four core factors:

• Hiring and Firing Authority: Can the business hire, terminate, or meaningfully influence those decisions?
• Supervision and Control: Can it direct schedules, workloads, or working conditions?
• Compensation Influence: Does it set or affect pay rates or methods?
• Employment Records: Does it maintain payroll, timekeeping, or personnel records?

Notably, the rule restores the relevance of “reserved” (contractual) control. Even if you never exercise authority over a worker, having that authority in your agreement can now weigh toward joint-employer status. Day-to-day supervision carries the most weight, but unused contractual rights are now part of the analysis

The rule also adopts a more flexible, fact-specific approach, moving away from the rigid application of prior versions. The new rule will now permit consideration of other evidence of control. Ordinary business practices such as enforcing quality standards, safety requirements, or brand consistency, do not, on their own, create joint-employer liability. The line for joint employer status is crossed when those practices translate into meaningful control over workers.

Practical Takeaways

In practice, the rule shifts attention back to where many businesses carry the most hidden risk: contracts with vendors and contractors, and day-to-day interactions with third-party workers.

Start by reviewing your high-risk third-party agreements. Where might you become responsible due to your control over another business’ employees? Contractual provisions that give you authority over hiring, discipline, or pay can become key evidence of joint-employer status. More importantly, however, directing work, setting schedules, or stepping into a supervisory role can quickly move your company from “client” to “joint employer” in the eyes of regulators.

If you have questions about how this proposed DOL Rule may affect your workforce structure, our team can help you assess and reduce your risk. It isn’t too early to start evaluating risk and preparing for this change.