U.S. Labor Department Moves to Redefine Joint Employment Rules: What Businesses Should Know

When a worker provides services to two separate companies at the same time, a critical legal question emerges: are both companies responsible for complying with federal labor laws? The answer can have major consequences, especially in cases involving overtime pay, wage obligations, and liability for violations.

It can also determine whether a second company is accountable for penalties if labor laws are broken—for example, when a minor is assigned hazardous work.

To address this uncertainty, the United States Department of Labor has introduced a proposed rule aimed at clarifying how joint employment should be defined and enforced.

Investingora.com — photo: Jacquelyn Martin/Reuters

🔍 A New Proposal to Clarify Joint Employment

The proposed regulation, titled Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act, was officially published in the U.S. Federal Register on April 22.

Its main purpose is to remove confusion about when joint employment applies and to clearly define its scope within federal labor regulations. The proposal also seeks to:

• Strengthen compliance with labor laws
• Clearly outline employer and employee responsibilities
• Simplify enforcement processes
• Reduce costly legal disputes
• Promote consistency in court decisions

⚖️ What Joint Employment Means

Joint employment occurs when two or more employers share legal responsibility for the same worker. This situation is particularly common in industries such as:

• Staffing and workforce agencies
• Franchise operations
• Construction projects
• Agricultural work

When joint employment exists, all involved employers are equally responsible for ensuring workers receive proper wages, benefits, and overtime compensation.

🧠 The Updated “Bonnette” Standard

A central element of the proposal is a revised version of the “Bonnette” test, which is used to determine whether joint employment relationships exist—especially in “vertical” scenarios.

Vertical joint employment typically arises when a worker is formally employed by one company but performs work that also benefits another business. This creates a key question: should that second company also be legally considered an employer?

To answer this, the updated test evaluates whether the potential joint employer:

• Has the power to hire or terminate the worker
• Exercises significant control over work schedules or job conditions
• Determines how and how much the worker is paid
• Maintains employment records

These criteria reflect common factors already used by courts when applying the Fair Labor Standards Act, helping create a more unified and predictable standard.

🚀 Expected Impact of the Proposal

By consolidating these guidelines, the Department of Labor aims to create greater consistency for employers, workers, and regulators alike.

The expected outcomes include:

For businesses:

• Clearer legal obligations
• Lower risk of non-compliance
• Reduced litigation costs

For workers:

• Better protection of wages and rights
• Increased clarity in employment relationships

The agency also expects that clearer rules will reduce the time and expense required to determine whether joint employment applies in specific cases.

📣 Public Comment Period

This proposal marks the beginning of the rulemaking process. Stakeholders—including employers, workers, and industry representatives—are invited to submit feedback during a 60-day public comment period, which runs through June 22 via regulations.gov.

🔑 Final Thoughts

The effort to redefine joint employment reflects a broader push to modernize labor regulations and address complex working arrangements. Businesses that rely on shared labor models should closely monitor these developments to ensure compliance and minimize legal risks.