The Joint Employer Is Back (Again): DOL Proposes New (or Is that Old?) Rule

Key Takeaways

• DOL revives four‑factor test, adding indirect control.
• Proposed rule broadens joint employer definition versus 2020 rule.
• Staffing agencies, franchises face heightened liability risk.
• Connecticut employers must juggle federal rule and state ABC test.
• Public comment period ends 60 days after April 23, 2026.

Pulse Analysis

The Department of Labor’s latest proposal marks a return to the pre‑2021 regulatory framework that many employers have long awaited. After rescinding its 2017 guidance, the agency relied on a patchwork of circuit court decisions, leaving businesses uncertain about when they might be deemed joint employers. By reinstating the four‑factor test—hiring/firing, control of schedule and conditions, payment authority, and record‑keeping—the DOL restores a familiar analytical tool, but it expands the scope by treating indirect or reserved authority as sufficient and by re‑introducing economic‑dependence considerations.

For companies that rely on staffing firms, subcontractors, or franchise models, the broadened definition could translate into significant liability exposure. Joint‑employer status triggers joint and several responsibility for minimum‑wage violations, overtime accruals, and FMLA coverage, meaning that hours worked across affiliated entities must be aggregated. The inclusion of indirect control means that even without day‑to‑day supervision, a parent company’s contractual right to set pay scales or approve schedules may trigger liability. Practically, firms should audit existing agreements, map out any control mechanisms—direct or reserved—and consider indemnification clauses to mitigate potential joint‑employer findings.

State law adds another layer of complexity, especially in Connecticut where the Workers’ Compensation Act and the ABC test impose stricter standards than federal law. Connecticut courts may hold a principal employer liable for subcontractor workers’ injuries even when the federal joint‑employer test is not met, and the ABC test can reclassify workers as employees, feeding into joint‑employer analysis. Employers should therefore conduct a dual‑track compliance review, aligning federal contracts with state requirements, and proactively submit comments during the 60‑day comment window to shape the final rule. Taking these steps now can reduce uncertainty and protect against costly litigation down the line.