Proposed Rule2026-07959
Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act
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Published
April 23, 2026
Issuing agencies
Labor DepartmentWage and Hour Division
Abstract
Since 2021, the Department has not provided any regulatory guidance addressing joint employer status under the Fair Labor Standards Act (FLSA or Act) for the benefit of workers, employers, or its enforcement personnel. In this rulemaking, the Department proposes to clarify how to determine joint employer status under the FLSA in Part 791 of Title 29, where its joint employer regulations were located prior to 2021. Additionally, the Department is also proposing to amend provisions in its regulations implementing the Family and Medical Leave Act (FMLA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA) to provide that joint employer status under those laws be determined using the Department's FLSA analysis, as the FMLA and MSPA both incorporate the FLSA's employment definitions. This rulemaking is intended to provide clarity and a measure of uniformity for employers and employees in an area of the law where components of legislative, executive, and judicial branches--at both the federal and state levels--have presented widely varying tests and standards. In addition, the proposed rule offers a nationwide standard for use by the Department's investigators and law enforcement personnel that would not only ensure the evenhanded application of the Act in matters that often cross state and circuit lines but also preserve core consistency with the wide variety of potentially relevant judicial frameworks. The proposed rule intends to marshal the commonality between those approaches closest to the statute as construed by the courts and, in so doing, simplify the Department's enforcement of the law, reduce litigation, and provide a reliable and uniform analysis for workers and employers that ultimately applies and complements the core commonality between the various tests applied by the federal courts.
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<title>Federal Register, Volume 91 Issue 78 (Thursday, April 23, 2026)</title>
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[Federal Register Volume 91, Number 78 (Thursday, April 23, 2026)]
[Proposed Rules]
[Pages 21878-21922]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-07959]
[[Page 21877]]
Vol. 91
Thursday,
No. 78
April 23, 2026
Part II
Department of Labor
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Wage and Hour Division
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29 CFR Parts 500, 780, 791, et al.
Joint Employer Status Under the Fair Labor Standards Act, Family and
Medical Leave Act, and Migrant and Seasonal Agricultural Worker
Protection Act; Proposed Rule
Federal Register / Vol. 91 , No. 78 / Thursday, April 23, 2026 /
Proposed Rules
[[Page 21878]]
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DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Parts 500, 780, 791, and 825
[Docket No. WHD-2026-0067]
RIN 1235-AA48
Joint Employer Status Under the Fair Labor Standards Act, Family
and Medical Leave Act, and Migrant and Seasonal Agricultural Worker
Protection Act
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Notice of proposed rulemaking.
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SUMMARY: Since 2021, the Department has not provided any regulatory
guidance addressing joint employer status under the Fair Labor
Standards Act (FLSA or Act) for the benefit of workers, employers, or
its enforcement personnel. In this rulemaking, the Department proposes
to clarify how to determine joint employer status under the FLSA in
Part 791 of Title 29, where its joint employer regulations were located
prior to 2021. Additionally, the Department is also proposing to amend
provisions in its regulations implementing the Family and Medical Leave
Act (FMLA) and Migrant and Seasonal Agricultural Worker Protection Act
(MSPA) to provide that joint employer status under those laws be
determined using the Department's FLSA analysis, as the FMLA and MSPA
both incorporate the FLSA's employment definitions. This rulemaking is
intended to provide clarity and a measure of uniformity for employers
and employees in an area of the law where components of legislative,
executive, and judicial branches--at both the federal and state
levels--have presented widely varying tests and standards. In addition,
the proposed rule offers a nationwide standard for use by the
Department's investigators and law enforcement personnel that would not
only ensure the evenhanded application of the Act in matters that often
cross state and circuit lines but also preserve core consistency with
the wide variety of potentially relevant judicial frameworks. The
proposed rule intends to marshal the commonality between those
approaches closest to the statute as construed by the courts and, in so
doing, simplify the Department's enforcement of the law, reduce
litigation, and provide a reliable and uniform analysis for workers and
employers that ultimately applies and complements the core commonality
between the various tests applied by the federal courts.
DATES: Interested persons are invited to submit written comments on
this notice of proposed rulemaking (NPRM). Comments must be received on
or before June 22, 2026.
ADDRESSES: You may submit comments, identified by Regulatory
Information Number (RIN) 1235-AA48, by either of the following methods:
<bullet> Electronic Comments: Submit comments through the Federal
eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the
instructions for submitting comments.
<bullet> Mail: Address written submissions to: Division of
Regulations, Legislation, and Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
Washington, DC 20210.
Instructions: Response to this NPRM is voluntary. The Department
requests that no business proprietary information, copyrighted
information, or personally identifiable information be submitted in
response to this NPRM. Commenters submitting file attachments on
<a href="https://www.regulations.gov">https://www.regulations.gov</a> are advised that uploading text-recognized
documents--i.e., documents in a native file format or documents which
have undergone optical character recognition (OCR)--enable staff at the
Department to more easily search and retrieve specific content included
in your comment for consideration.
Anyone who submits a comment (including duplicate comments) should
understand and expect that the comment, including any personal
information provided, will become a matter of public record and will be
posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>. The Department
posts comments gathered and submitted by a third-party organization as
a group under a single document ID number on <a href="https://www.regulations.gov">https://www.regulations.gov</a>. All comments must be received by 11:59 p.m. ET on
June 22, 2026, for consideration in this rulemaking; comments received
after the comment period closes will not be considered.
The Department strongly recommends that commenters submit their
comments electronically via <a href="https://www.regulations.gov">https://www.regulations.gov</a> to ensure
timely receipt prior to the close of the comment period, as the
Department continues to experience delays in the receipt of mail.
Please submit only one copy of your comments by only one method.
Docket: For access to the docket to read background documents or
comments, go to the Federal eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. In accordance with 5 U.S.C. 553(b)(4), a summary
of this rule may also be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Daniel Navarrete, Director, Division
of Regulations, Legislation, and Interpretation, Wage and Hour Division
(WHD), U.S. Department of Labor, Room S-3502, 200 Constitution Avenue
NW, Washington, DC 20210; telephone: (202) 693-0406 (this is not a
toll-free number). Alternative formats are available upon request by
calling 1-866-487-9243. If you are deaf, hard of hearing, or have a
speech disability, please dial 7-1-1 to access telecommunications relay
services.
Questions of interpretation or enforcement of the agency's existing
regulations may be directed to the nearest WHD district office. Locate
the nearest office by calling the WHD's toll-free help line at (866)
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
zone, or log onto WHD's website at <a href="https://www.dol.gov/agencies/whd/contact/local-offices">https://www.dol.gov/agencies/whd/contact/local-offices</a> for a nationwide listing of WHD district and area
offices.
SUPPLEMENTARY INFORMATION:
I. Background
A. Relevant FLSA, FMLA, and MSPA Statutory Definitions
Enacted in 1938, the FLSA requires that, among other things,
covered employers pay their nonexempt employees at least the federal
minimum wage for every hour worked and overtime pay for every hour
worked in excess of 40 in a workweek, and it mandates that employers
keep certain records regarding their employees.\1\ Section 3(d) of the
Act defines ``employer'' to ``include[ ] any person acting directly or
indirectly in the interest of an employer in relation to an employee.''
\2\ Section 3(e) generally defines ``employee'' to mean ``any
individual employed by an employer'' \3\ and identifies certain
specific groups of workers who are not ``employees'' for purposes of
the FLSA.\4\ Finally, section 3(g) defines ``employ'' to ``include[ ]
to suffer or permit to work.'' \5\
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\1\ See 29 U.S.C. 206(a) (minimum wage requirement), 207(a)
(overtime pay requirement), 211(c) (recordkeeping requirements).
\2\ 29 U.S.C. 203(d).
\3\ 29 U.S.C. 203(e)(1).
\4\ 29 U.S.C. 203(e)(2)-(5).
\5\ 29 U.S.C. 203(g).
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Congress enacted MSPA in 1983 to protect migrant and seasonal
agricultural workers by establishing employment standards related to
wages, housing, transportation, disclosures,
[[Page 21879]]
and recordkeeping.\6\ Agricultural employers, agricultural
associations, and farm labor contractors (as those terms are defined in
MSPA) must comply with such applicable standards in their employment of
migrant and seasonal agricultural workers.\7\ MSPA also requires farm
labor contractors to register with the Department and obtain a
certificate of registration.\8\ It is a violation of MSPA to threaten,
discharge, or in any manner discriminate against any migrant or
seasonal agricultural worker because such worker, with just cause,
files a complaint, institutes a proceeding, testifies or is about to
testify in a proceeding, or exercises any right under MSPA.\9\ MSPA
adopts the FLSA's definition of ``employ.'' \10\
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\6\ See generally 29 U.S.C. 1801, et seq.
\7\ See 29 U.S.C. 1821-1823, 1831-32, 1841-1844.
\8\ See 29 U.S.C. 1811-1815.
\9\ 29 U.S.C. 1855(a).
\10\ 29 U.S.C. 1802(5) (``The term `employ' has the meaning
given such term under [the FLSA, 29 U.S.C. 203(g)].'').
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The FMLA was enacted in 1993. It entitles eligible employees of
covered employers to take unpaid, job-protected leave for specified
family and medical reasons while continuing group health insurance
coverage under the same terms and conditions as if the employee had not
taken leave.\11\ Eligible employees who take such leave must generally
be restored to the same or an equivalent position when they return to
work after FMLA leave.\12\ An employer cannot interfere with, restrain,
or deny an employee's exercise of or attempt to exercise any rights
under the FMLA.\13\ The FMLA adopts the FLSA's definitions of
``employ'' and ``employee.'' \14\
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\11\ See 29 U.S.C. 2611-2614.
\12\ See 29 U.S.C. 2614(a)(1)-(2).
\13\ See 29 U.S.C. 2615.
\14\ 29 U.S.C. 2611(3) (providing that the terms ``employ'' and
``employee'' for purposes of the FMLA have the same meanings given
such terms in 29 U.S.C. 203(e) and (g)). The FMLA has its own
definitions for whether an employee is ``eligible'' for FMLA leave
and whether his or her employer is covered by the FMLA. See 29
U.S.C. 2611(2), (4).
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B. Early Guidance and Regulations Regarding FLSA Joint Employment
A year after the FLSA's enactment, WHD issued Interpretative
Bulletin Number 13 in July 1939 addressing, among other topics, whether
two or more companies could be jointly and severally liable for a
single employee's hours worked under the FLSA.\15\ The Bulletin
acknowledged the possibility of what we consider today as joint
employer liability and offered an illustration where two companies
arranged ``to employ a common watchman'' who had ``the duty of watching
the property of both companies concurrently for a specified number of
hours each night.'' \16\ The Bulletin concluded that the companies
``are not each required to pay the minimum rate required under the
statute for all hours worked by the watchman . . . but . . . should be
considered as a joint employer for purposes of the [FLSA].'' \17\ This
scenario--where an employee is jointly employed by two or more
employers that simultaneously benefit from the employee's work--is
understood today as vertical joint employment.\18\
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\15\ Interpretative Bulletin No. 13, ``Hours Worked:
Determination of Hours for Which Employees are Entitled to
Compensation Under the Fair Labor Standards Act of 1938,'' ]] 16-17.
Shortly thereafter, WHD revised other portions of the Bulletin that
are not pertinent here.
\16\ Id. ] 16.
\17\ Id.
\18\ See, e.g., Clifton v. Famous Bourbon Mgmt. Grp., Inc., 762
F. Supp. 3d 480, 496 n.125 (E.D. La. 2025).
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The Bulletin provided a second example of an employee who works 40
hours for company A and 15 hours for company B during the same
workweek.\19\ The Bulletin explained that if the two companies are
``acting entirely independently of each other with respect to the
employment of the particular employee,'' they are not joint employers
and may ``disregard all work performed by the employee for the other
company'' in determining their obligations to the employee under the
FLSA for that workweek.\20\ On the other hand, if ``the employment by A
is not completely disassociated from the employment by B,'' they are
joint employers and must consider the hours worked for both as a whole
to determine their obligations to the employee under the FLSA for that
workweek.\21\ This scenario--where an employee works separate hours for
two (or more) employers in the same workweek that are sufficiently
associated with each other with respect to the employment of the
employee--is understood today as horizontal joint employment.\22\
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\19\ Interpretative Bulletin No. 13, ] 17.
\20\ Id.
\21\ Id.
\22\ See supra fn.18.
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The Bulletin concluded by saying that, ``at least in the following
situations, an employer will be considered as acting in the interest of
another employer in relation to an employee: If the employers make an
arrangement for the interchange of employees or if one company
controls, is controlled by, or is under common control with, directly
or indirectly, the other company.'' \23\
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\23\ See 29 CFR part 791 (1958 or 1959); see also Interpretative
Bulletin No. 13, ] 17.
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In 1958, the Department published regulations that expounded on the
concepts WHD had set forth in Interpretative Bulletin No. 13.\24\ Those
regulations explained that there is joint employment under the FLSA and
that the determination ``depends upon all the facts in the particular
case.'' \25\ They further explained that two or more employers that
``are acting entirely independently of each other and are completely
disassociated'' with respect to the employee's employment are not joint
employers, but joint employment exists if ``employment by one employer
is not completely disassociated from employment by the other
employer(s).'' \26\ The regulations also advised that, ``[w]here the
employee performs work which simultaneously benefits two or more
employers, or works for two or more employers at different times during
the workweek,'' the employers are joint employers in situations such
as: (1) where there is an arrangement between the employers to share
the employee's services, as, for example, to interchange employees; (2)
where one employer is acting directly or indirectly in the interest of
the other employer (or employers) in relation to the employee; or (3)
where the employers are not completely disassociated with respect to
the employment of a particular employee and may be deemed to share
control of the employee, directly or indirectly, by reason of the fact
that one employer controls, is controlled by, or is under common
control with the other employer.\27\
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\24\ Joint Employment Relationship under Fair Labor Standards
Act of 1938, 23 FR 5905 (Aug. 5, 1958) (promulgating 29 CFR part
791).
\25\ 29 CFR 791.2(a) (1958).
\26\ Id.
\27\ 29 CFR 791.2(b) (1958) (footnotes omitted).
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In 1961, the Department amended a footnote in those regulations to
clarify that a joint employer is also jointly liable for overtime
pay.\28\ Nearly 60 years passed before the Department amended and
updated Part 791 in 2020. However, in 1973, the Department did
promulgate regulations addressing joint employment in certain
agricultural contexts that remain in effect today.\29\ Specifically,
subsection 780.305(c) provides that ``[a] farmer whose crops are
harvested by an independent
[[Page 21880]]
contractor is considered to be a joint employer with the contractor who
supplies the harvest hands if the farmer has the power to direct,
control or supervise the work, or to determine the pay rates or method
of payment for the harvest hands'' (citing 29 CFR 780.331). Also,
subsection 780.331(d) provides that ``[w]hether or not a labor
contractor or crew leader is found to be a bona fide independent
contractor, his employees are considered jointly employed by him and
the farmer who is using their labor if the farmer has the power to
direct, control or supervise the work, or to determine the pay rates or
method of payment'' (citing cases).
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\28\ Miscellaneous Amendments, 26 FR 7730, 7732 (Aug. 18, 1961).
\29\ Clarification of Employment Status of Certain Agricultural
Labor, 38 FR 27520-21 (Oct. 4, 1973) (adding 29 CFR 780.305(c) and
revising 29 CFR 780.331(d)).
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C. Regulations Regarding FMLA and MSPA Joint Employment
1. FMLA Regulations
The Department's FMLA regulations define various terms under the
FMLA, and consistent with the FMLA's adoption of the FLSA's statutory
definitions, define ``employ'' to mean ``to suffer or permit to work''
and ``employee'' to generally mean ``any individual employed by an
employer.'' \30\ The regulations also address joint employment under
the FMLA, providing: ``Where two or more businesses exercise some
control over the work or working conditions of the employee, the
businesses may be joint employers under FMLA. Joint employers may be
separate and distinct entities with separate owners, managers, and
facilities.'' \31\ The regulations then restate, almost verbatim, the
three joint employment situations identified in the 1958
regulation.\32\ The FMLA regulations add: ``A determination of whether
or not a joint employment relationship exists is not determined by the
application of any single criterion, but rather the entire relationship
is to be viewed in its totality.'' \33\
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\30\ 29 CFR 825.102.
\31\ 29 CFR 825.106(a).
\32\ Id.; see supra n. 24.
\33\ 29 CFR 825.106(b)(1).
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Where joint employment exists, the FMLA regulations clarify that
employees who are jointly employed by two or more employers must be
counted by all joint employers in determining employer coverage and
employee eligibility under the FMLA.\34\ However, only an employee's
``primary employer'' is responsible for giving required notices to the
employee, providing FMLA leave, and maintaining health benefits.\35\
Job restoration is the primary responsibility of the primary employer,
while a secondary employer would be responsible for accepting an
employee returning from FMLA leave in certain circumstances.\36\
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\34\ See 29 CFR 29 CFR 825.106(d). Among other coverage
requirements, ``eligible employees'' covered by the FMLA must work
at a location where their employer has at least 50 employees within
a 75-mile radius. See 29 U.S.C. 2611(2)(B)(ii).
\35\ See 29 CFR 825.106(c).
\36\ See 29 CFR 825.106(e); see also The Family and Medical
Leave Act of 1993, Final Rule, 60 FR 2180-01, 2183 (Jan. 6, 1995).
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Finally, the regulations provide FMLA-specific guidance for the
joint employer status of ``temporary placement agencies'' and
``Professional Employer Organizations (PEOs),'' which are described as
companies that ``[contract] with client employers to perform
administrative functions such as payroll, benefits, regulatory
paperwork, and updating employment policies.'' \37\ When joint
employment exists in a scenario involving a temporary placement agency,
``the placement agency most commonly would be the primary employer.''
\38\ By contrast, where a PEO is a joint employer, ``the client
employer most commonly would be the primary employer.'' \39\
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\37\ 29 CFR 825.106(b)(2).
\38\ 29 CFR 825.106(c).
\39\ Id.
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The Department's initial FMLA regulations (promulgated in an
Interim Final Rule in 1993 and which the Department applied through
1995) had set forth the following factors to determine joint
employment: (1) the nature and degree of control of the workers; (2)
the degree of supervision, direct or indirect, of the work; (3) the
power to determine the pay rates or the methods of payment of the
workers; (4) the right, directly or indirectly, to hire, fire, or
modify the employment conditions of the workers; and (5) preparation of
the payroll and payment of wages.\40\
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\40\ The Family and Medical Leave Act of 1993, Interim Final
Rule, 58 FR 31794, 31814 (Sec. 825.106(a)(1)-(5)) (June 4, 1993).
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2. MSPA Regulations
Shortly after Congress enacted MSPA in 1983, the Department issued
regulations that included factors for determining joint employer status
under the statute. They were: (A) the nature and degree of control of
the workers; (B) the degree of supervision, direct or indirect, of the
work; (C) the power to determine the pay rates or the methods of
payment of the workers; (D) the right, directly or indirectly, to hire,
fire, or modify the employment conditions of the workers; and (E)
preparation of payroll and the payment of wages.\41\ WHD and the
Department applied these factors between 1983 and 1997.
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\41\ Migrant and Seasonal Agricultural Worker Protection
Regulations, Final Rule, 48 FR 36736-01, 36745 (Sec.
500.20(h)(4)(ii)(A)-(E)) (Aug. 12, 1983).
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In 1997, the Department's revised its MSPA regulations that address
joint employment, adopting the framework it applies today.\42\ These
regulations provide that ``the definition of the term employ includes
the joint employment principles applicable under the Fair Labor
Standards Act,'' \43\ and that ``[j]oint employment under the Fair
Labor Standards Act is joint employment under the MSPA.'' \44\ Where
joint employment exists, each joint employer must ensure that the
employee receives all employment-related rights granted by MSPA, such
as accurate and timely disclosure of the terms and conditions of
employment, written payroll records, and payment of wages when due.\45\
These employer responsibilities need only be carried out by one joint
employer, but the failure to provide an employee with any of these
required protections will result in joint liability for all joint
employers.\46\
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\42\ Migrant and Seasonal Agricultural Worker Protection Act,
Final Rule, 62 FR 11734 (Mar. 12, 1997).
\43\ 29 CFR 500.20(h)(5).
\44\ 29 CFR 500.20(h)(5)(i).
\45\ See WHD Fact Sheet #35: Joint Employment and Independent
Contractors Under the Migrant and Seasonal Agricultural Worker
Protection Act, <a href="https://www.dol.gov/agencies/whd/fact-sheets/35-mspa-joint-employment">https://www.dol.gov/agencies/whd/fact-sheets/35-mspa-joint-employment</a>.
\46\ Id.
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To determine if joint employment exists, the MSPA regulations
borrow from the 1958 regulation, explaining: ``A determination of
whether the employment is to be considered joint employment depends
upon all the facts in the particular case. If the facts establish that
two or more persons are completely disassociated with respect to the
employment of a particular employee, a joint employment situation does
not exist.'' \47\
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\47\ 29 CFR 500.20(h)(5).
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The MSPA regulations further explain that the common scenario for
joint employment under MSPA involves whether agricultural workers
employed by a farm labor contractor are jointly employed by the
agricultural employer/association.\48\ When making such a
determination, ``the ultimate question to be determined is the economic
reality--whether the worker is so economically dependent upon the
agricultural employer/association as to be considered its employee.''
\49\ For use ``in determining the ultimate question of economic
dependency,'' the MSPA regulations provide seven non-exhaustive
factors:
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\48\ 29 CFR 500.20(h)(5)(i).
\49\ 29 CFR 500.20(h)(5)(iii).
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[[Page 21881]]
(A) Whether the agricultural employer/association has the power,
either alone or through control of the farm labor contractor to direct,
control, or supervise the worker(s) or the work performed (such control
may be either direct or indirect, taking into account the nature of the
work performed and a reasonable degree of contract performance
oversight and coordination with third parties);
(B) Whether the agricultural employer/association has the power,
either alone or in addition to another employer, directly or
indirectly, to hire or fire, modify the employment conditions, or
determine the pay rates or the methods of wage payment for the
worker(s);
(C) The degree of permanency and duration of the relationship of
the parties, in the context of the agricultural activity at issue;
(D) The extent to which the services rendered by the worker(s) are
repetitive, rote tasks requiring skills which are acquired with
relatively little training;
(E) Whether the activities performed by the worker(s) are an
integral part of the overall business operation of the agricultural
employer/association;
(F) Whether the work is performed on the agricultural employer/
association's premises, rather than on premises owned or controlled by
another business entity; and
(G) Whether the agricultural employer/association undertakes
responsibilities in relation to the worker(s) which are commonly
performed by employers, such as preparing and/or making payroll
records, preparing and/or issuing pay checks, paying FICA taxes,
providing workers' compensation insurance, providing field sanitation
facilities, housing or transportation, or providing tools and equipment
or materials required for the job (taking into account the amount of
the investment).\50\
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\50\ 29 CFR 500.20(h)(5)(iv).
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The MSPA regulations further provide that no one factor ``will be
dispositive of the ultimate question,'' and ``[h]ow the factors are
weighed depends upon all of the facts and circumstances.'' \51\
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\51\ Id.
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D. Federal Caselaw on Joint Employer Liability Under the FLSA
Federal courts generally identify two Supreme Court cases as
relevant precedent for adjudicating FLSA joint employment disputes:
Rutherford Food Corp. v. McComb, 331 U.S. 722 (1947), and Falk v.
Brennan, 414 U.S. 190 (1973).\52\
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\52\ WHD noted in its 2020 Joint Employer Rule that Rutherford
Food ``focus[ed] . . . on whether the workers were employees under
the FLSA or independent contractors.'' 85 FR 2827; see also Salinas
v. Commercial Interiors, Inc., 848 F.3d 125, 135 (4th Cir. 2017)
(explaining that, ``[a]lthough Rutherford Food recognized joint
employment[,] . . . the case principally addressed whether the meat
boners were employees or independent contractors''). A number of
courts, however, cite to Rutherford Food as an FLSA joint employment
case. See Zheng v. Liberty Apparel Co., 355 F.3d 61, 70 (2d Cir.
2003); Torres-Lopez v. May, 111 F.3d 633, 640 (9th Cir. 1997);
Layton v. DHL Exp. (USA), Inc., 686 F.3d 1172, 1180 (11th Cir.
2012).
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Rutherford Food examined whether a group of skilled meat boners
working as a crew on the premises of a slaughterhouse were jointly
employed by the slaughterhouse. Although the workers were recruited and
paid by an ``experienced boner'' whose contract with the slaughterhouse
stated that he had ``complete control over the other boners'' and that
they ``would be his employees,'' the Court nevertheless found that the
workers were also employed by the slaughterhouse, noting that
``determination of [an employment] relationship does not depend on such
isolated factors [as the existence of a contractual agreement or
industry custom], but rather upon the circumstances of the whole
activity.'' \53\ The Court found relevant, among other facts, that
``responsibility under the boning contracts without material changes
passed from one boner to another,'' ``[t]he premises and equipment of
[the slaughterhouse] were used for the work,'' ``[t]he group had no
business organization that could or did shift as a unit from one
slaughterhouse to another,'' and ``[t]he managing official of the plant
kept close touch on the operation.'' \54\
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\53\ Rutherford Food, 331 U.S. at 724-25, 730.
\54\ Id. at 730.
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Falk addressed whether an apartment management company was an FLSA
joint employer of the employees of the apartment buildings that it
managed.\55\ The Court held that, because the management company
exercised ``substantial control [over] the terms and conditions of the
[employees'] work,'' the management company was an employer under 29
U.S.C. 203(d), and could therefore be jointly liable with the building
owners for any wages due to the employees under the FLSA.\56\
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\55\ 414 U.S. at 195.
\56\ Id.
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In 1983, the Ninth Circuit issued a seminal joint employer
decision, Bonnette v. California Health & Welfare Agency.\57\ In
Bonnette, seniors and individuals with disabilities receiving state
welfare assistance (the recipients) employed home care workers as part
of a state welfare program.\58\ Taking an approach similar to Falk, the
court addressed whether California and several of its counties (the
counties) were joint employers of the workers, and in making that
determination, the court found ``four factors [to be] relevant'':
``whether the alleged [joint] employer (1) had the power to hire and
fire the employees, (2) supervised and controlled employee work
schedules or conditions of employment, (3) determined the rate and
method of payment, and (4) maintained employment records.'' \59\ The
court noted that these four factors ``are not etched in stone and will
not be blindly applied'' and that the determination of joint employer
status depends on the circumstances of the whole activity.\60\ Applying
the four factors, the court concluded that the counties ``exercised
considerable control'' and ``had complete economic control'' over ``the
nature and structure of the employment relationship'' between the
recipients and home care workers, and were therefore ``employers'' too,
jointly and severally liable with the recipients to the home care
workers.\61\
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\57\ 704 F.2d 1465, abrogated on other grounds by Garcia v. San
Antonio Metro. Transit Auth., 469 U.S. 528 (1985). Although the
Ninth Circuit later adopted a thirteen-factor test in Torres-Lopez
v. May, 111 F.3d 633, 639-41 (9th Cir. 1997), many courts have
treated Bonnette as the baseline for their own joint employer tests.
\58\ 704 F.2d at 1467-68.
\59\ Id. at 1469-70.
\60\ Id. at 1470.
\61\ Id.
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E. WHD Subregulatory Guidance Prior to 2020
WHD has addressed joint employment in several subregulatory
documents--including opinion letters,\62\ administrator
interpretations,\63\ as well as other guidance.
---------------------------------------------------------------------------
\62\ See, e.g., WHD Opinion Ltr. FLSA2005-15, 2005 WL 2086804
(Apr. 11, 2005) (addressing joint employment in a health care system
comprised of hospitals, nursing homes, and parent holding company);
WHD Opinion Ltr., 1999 WL 1788146 (Aug. 24, 1999) (advising that
private duty nurses were jointly employed by a hospital and
individual patients); WHD Opinion Ltr., 1998 WL 852621 (Jan. 27,
1998) (addressing the joint employment of grocery vendor employees
stocking grocery shelves); WHD Opinion Ltr. FLSA-1089, 1989 WL
1632931 (Aug. 9, 1989) (advising that workers participating in an
enclave program would be jointly employed by a participating
business and a supervising workshop).
\63\ See Administrator's Interpretation No. 2016-1, available at
2016 WL 284582 (Jan. 20, 2016) (asserting that the scope of joint
employment under the FLSA is ``as broad as possible'') (withdrawn
effective June 7, 2017); Administrator's Interpretation No. 2014-2,
available at 2014 WL 2816951 (June 19, 2014) (addressing joint
employment in home care) (withdrawn on March 10, 2020).
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F. 2020 Joint Employer Rule
In January 2020, the Department published a final rule titled
``Joint
[[Page 21882]]
Employer Status Under the Fair Labor Standards Act,'' which took effect
March 16, 2020 (2020 Rule).\64\ The 2020 Rule explained that the 1958
version of Part 791 was ``useful'' when determining horizontal joint
employment but ``was not helpful and did not provide an adequate
explanation'' when determining vertical joint employment.\65\ The 2020
Rule revised Part 791 so that: section 791.1 contained an introductory
statement; section 791.2 contained the substance of the 2020 Rule's
analyses for both vertical joint employment (which it referred to as
``the first joint employer scenario'') and horizontal joint employment
(which it referred to as ``the second joint employer scenario''); and
section 791.3 contained a severability provision.\66\ The 2020 Rule
sought ``to promote certainty for employers and employees, reduce
litigation, promote greater uniformity among court decisions, and
encourage innovation in the economy.'' \67\
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\64\ Joint Employer Status Under the Fair Labor Standards Act,
Final Rule, 85 FR 2820 (Jan. 16, 2020). The Department had published
a notice of proposed rulemaking requesting comments on a proposed
rule. Joint Employer Status Under the Fair Labor Standards Act,
NPRM, 84 FR 14043 (Apr. 9, 2019). The final rule adopted ``the
analyses set forth in the NPRM largely as proposed.'' 85 FR 2820.
\65\ Id. at 2825.
\66\ 29 CFR 791.1, 791.2, and 791.3 (2020).
\67\ 85 FR 2820.
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1. 2020 Rule's Vertical Joint Employment Standard
For vertical joint employment, the 2020 Rule stated that ``[t]he
other person [that is benefitting from the employee's labor] is the
employee's joint employer only if that person is acting directly or
indirectly in the interest of the employer in relation to the
employee,'' and then cited FLSA section 3(d)'s definition of
``employer.'' \68\ The 2020 Rule asserted that section 3(d) was the
sole statutory provision for determining ``joint employer status''
under the FLSA--not sections 3(e) or 3(g).\69\ The 2020 Rule further
provided that the definitions of ``employee'' and ``employ'' in
sections 3(e) and 3(g) ``determine whether an individual worker is an
employee under the [FLSA].'' \70\ Citing section 3(d)'s definition of
``employer'' as including ``any person acting directly or indirectly in
the interest of an employer in relation to an employee,'' the 2020 Rule
stated that ``only this language from section 3(d) contemplates the
possibility of a person in addition to the employer who is also an
employer and therefore jointly liable for the employee's hours
worked.'' \71\ The 2020 Rule concluded that this language from section
3(d), ``by its plain terms, contemplates an employment relationship
between an employer and an employee, as well as another person who may
be an employer too--which exactly fits the [vertical] joint employer
scenario under the [FLSA].'' \72\ The 2020 Rule relied on the Supreme
Court's decision in Falk and the Ninth Circuit's decision in Bonnette
to ``support focusing on section 3(d) as determining joint employer
status.'' \73\
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\68\ 29 CFR 791.2(a)(1) (2020) (citing 29 U.S.C. 203(d)).
\69\ See generally 85 FR 2825-28.
\70\ Id. at 2827.
\71\ Id. (citing 29 U.S.C. 203(d)); see also id. (``This
language from section 3(d) makes sense only if there is an employer
and employee with an existing employment relationship and the issue
is whether another person is an employer.'').
\72\ Id.
\73\ Id.
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The 2020 Rule explained that ``four factors are relevant to the
determination'' of whether the other employer is a joint employer in
the vertical joint employment situation.\74\ Those four factors were
whether the other employer: (1) hires or fires the employee; (2)
supervises and controls the employee's work schedule or conditions of
employment to a substantial degree; (3) determines the employee's rate
and method of payment; and (4) maintains the employee's employment
records.\75\ The 2020 Rule further explained that ``these four
factors--which weigh the economic reality of the potential joint
employer's control, direct or indirect, over the employee--are not only
the most relevant factors to the joint employer analysis, but also
afford stakeholders greatly needed clarity and uniformity.'' \76\
---------------------------------------------------------------------------
\74\ 29 CFR 791.2(a)(1) (2020).
\75\ 29 CFR 791.2(a)(1)(i)-(iv) (2020).
\76\ 85 FR 2830.
---------------------------------------------------------------------------
The 2020 Rule's four-factor test ``derived from'' Bonnette,\77\
with a few modifications. First, the 2020 Rule described the first
factor as whether the other employer ``[h]ires or fires the employee''
instead of whether it had ``the power'' to hire and fire.\78\ The 2020
Rule stated generally that the ``potential joint employer must actually
exercise . . . one or more of these indicia of control to be jointly
liable under the [FLSA],'' and that ``[t]he potential joint employer's
ability, power, or reserved right to act in relation to the employee
may be relevant for determining joint employer status, but such
ability, power, or right alone does not demonstrate joint employer
status without some actual exercise of control.'' \79\ Second, the 2020
Rule modified the Bonnette factor requiring consideration of whether
the potential joint employer supervises and controls work schedules or
conditions of employment by adding the phrase ``to a substantial
degree.'' Although Bonnette did not include this phrase in its
articulation of this factor, Bonnette did find that, on the facts
before it, the potential joint employers ``exercised considerable
control'' in that area.\80\ Third, the 2020 Rule stated that
``[s]atisfaction of the maintenance of employment records factor alone
will not lead to a finding of joint employer status'' (Bonnette did not
address this).\81\ Finally, the 2020 Rule stated that ``[a]dditional
factors may be relevant for determining joint employer status in this
scenario, but only if they are indicia of whether the potential joint
employer exercises significant control over the terms and conditions of
the employee's work.'' \82\ Bonnette indicated that ``[t]he ultimate
determination must be based `upon the circumstances of the whole
activity.' '' \83\
---------------------------------------------------------------------------
\77\ Id.
\78\ Compare 29 CFR 791.2(a)(1)(i) (2020) with Bonnette, 704
F.2d at 1469-70.
\79\ 29 CFR 791.2(a)(3)(i) (2020).
\80\ Compare 29 CFR 791.2(a)(1)(ii) (2020) with Bonnette, 704
F.2d at 1469-70.
\81\ Compare 29 CFR 791.2(a)(2) (2020) with Bonnette, 704 F.2d
at 1469-70.
\82\ 29 CFR 791.2(b) (2020).
\83\ 704 F.2d at 1470 (quoting Rutherford Food, 331 U.S. at
730).
---------------------------------------------------------------------------
The 2020 Rule also excluded consideration of the employee's
economic dependence on the potential joint employer, explaining that
``[e]conomic dependence is relevant when applying section 3(g) and
determining whether a worker is an employee under the [FLSA]; however,
determining whether a worker who is an employee under the [FLSA] has a
joint employer for his or her work is a different analysis that is
based on section 3(d).'' \84\ The 2020 Rule further explained that,
``[b]ecause evaluating control of the employment relationship by the
potential joint employer over the employee is the purpose of the
Department's four-factor balancing test, it is sensible to limit the
consideration of additional factors to those that indicate control.''
\85\
---------------------------------------------------------------------------
\84\ 29 CFR 791.2(c) (2020) (``[T]o determine joint employer
status, no factors should be used to assess economic dependence.'');
85 FR 2821.
\85\ 85 FR 2836.
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Finally, the 2020 Rule provided that a person's business model
(such as a franchise model), certain business practices (such as
allowing an employer to operate a store on the person's premises or
participating in an association health or retirement plan),
[[Page 21883]]
certain business agreements (such as requiring an employer in a
business contract to comply with specific legal obligations or to meet
certain standards to protect the health or safety of its employees),
and requiring quality control standards to ensure the consistent
quality of the work product, brand, or business reputation do not make
joint employer status more or less likely under the FLSA.\86\
---------------------------------------------------------------------------
\86\ 29 CFR 791.2(d)(ii)-(v) (2020).
---------------------------------------------------------------------------
2. 2020 Rule's Horizontal Joint Employment Standard
To determine horizontal joint employment, the 2020 Rule adopted the
longstanding standard articulated in the prior version of section 791.2
promulgated in the 1958 regulation with ``non-substantive revisions.''
\87\ The 2020 Rule stated that, when considering horizontal joint
employment, ``if the employers are acting independently of each other
and are disassociated with respect to the employment of the employee,''
they are not joint employers.\88\ It further stated that, ``if the
employers are sufficiently associated with respect to the employment of
the employee, they are joint employers and must aggregate the hours
worked for each for purposes of determining compliance with the
[FLSA].'' \89\ It identified the same three general examples of
horizontal joint employment provided in the 1958 version of section
791.2.\90\
---------------------------------------------------------------------------
\87\ 85 FR at 2823; see also id. at 2844-45.
\88\ 29 CFR 791.2(e)(1)-(2) (2020).
\89\ 29 CFR 791.2(e)(2) (2020).
\90\ Compare 29 CFR 791.2(e)(2)(i)-(iii) (2020) with 29 CFR
791.2(b)(1)-(3) (1958).
---------------------------------------------------------------------------
3. 2020 Rule's Additional Provisions
The 2020 Rule adopted additional provisions applicable to both
vertical and horizontal joint employment. Section 791.2(f) addressed
the consequences of joint employment and provided that ``[f]or each
workweek that a person is a joint employer of an employee, that joint
employer is jointly and severally liable with the employer and any
other joint employers for compliance'' with the Act.\91\ Section
791.2(g) provided 11 ``illustrative examples'' of how the 2020 Rule
applied to specific factual situations implicating vertical and
horizontal joint employment.\92\
---------------------------------------------------------------------------
\91\ 29 CFR 791.2(f) (2020).
\92\ 29 CFR 791.2(g) (2020).
---------------------------------------------------------------------------
In the 2020 Rule, the Department did not amend its FMLA or MSPA
joint employer regulations, explaining that ``[t]his final rule
provides the standards for determining joint employer status under the
FLSA.'' \93\ The Department added that it would ``continue to use the
standards in its MSPA joint employer regulation . . . to determine
joint employer status under MSPA,'' and would ``continue to use the
standards in its FMLA joint employer regulations . . . to determine
joint employer status under the FMLA.'' \94\
---------------------------------------------------------------------------
\93\ 85 FR 2828 n.55.
\94\ Id. (citing 29 CFR 500.20(h)(5); 825.106).
---------------------------------------------------------------------------
G. Legal Challenge to 2020 Rule and District Court Decision
In February 2020, 17 States and the District of Columbia (the
States) filed a lawsuit in the United States District Court for the
Southern District of New York against the Department asserting that the
2020 Rule violated the Administrative Procedure Act (APA).\95\ The
district court permitted the International Franchise Association, the
Chamber of Commerce of the United States of America, the National
Retail Federation, the Associated Builders and Contractors, and the
American Hotel and Lodging Association (the Intervenors) to intervene
as defendants in the case.\96\ The parties filed cross-motions for
summary judgment, which the district court decided on September 8,
2020.\97\
---------------------------------------------------------------------------
\95\ New York v. Scalia, No. 1:20-cv-01689 (S.D.N.Y. filed Feb.
26, 2020). The APA requires courts to hold unlawful and set aside
agency actions that are ``arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.'' 5 U.S.C.
706(2)(A).
\96\ New York v. Scalia, 2020 WL 3498755, at *5 (S.D.N.Y. June
29, 2020).
\97\ New York v. Scalia, 490 F. Supp. 3d 748 (S.D.N.Y. 2020).
---------------------------------------------------------------------------
The district court vacated the 2020 Rule's ``standard for vertical
joint employer liability.'' The district court concluded that the 2020
Rule violated the APA because it found that the rule conflicted with
the FLSA.\98\ The district court identified three conflicts: the 2020
Rule's reliance on the FLSA's definition of ``employer'' in section
3(d) as the sole textual basis for joint employment; its adoption of a
control-based test for determining vertical joint employment; and its
prohibition against considering additional factors beyond control, such
as economic dependence.\99\ In addition, the district court held that
the 2020 Rule was ``arbitrary and capricious'' for three reasons: the
2020 Rule did not adequately explain why it departed from the
Department's prior interpretations; the 2020 Rule did not consider the
conflict between it and the Department's MSPA joint employment
regulations; and the 2020 Rule did not adequately consider its cost to
workers.\100\
---------------------------------------------------------------------------
\98\ Id. at 774.
\99\ Id. at 774-92.
\100\ Id. at 792-95.
---------------------------------------------------------------------------
The district court concluded that the 2020 Rule's ``novel
interpretation for vertical joint employer liability'' was unlawful
under the APA and vacated all of Sec. 791.2 except for Sec.
791.2(e).\101\ The court determined that, because the 2020 Rule's
``non-substantive revisions to horizontal joint employer liability are
severable,'' Sec. 791.2(e) ``remains in effect.'' \102\
---------------------------------------------------------------------------
\101\ Id. at 795.
\102\ Id. at 795-96.
---------------------------------------------------------------------------
In November 2020, the Department and the Intervenors appealed the
district court's decision to the Second Circuit Court of Appeals.\103\
The resolution of the appeal is discussed below.
---------------------------------------------------------------------------
\103\ See New York v. Walsh, No. 20-3806 (2d Cir. 2021) (appeal
docketed on November 6, 2020).
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H. Rescission of the 2020 Rule
On July 30, 2021, the Department published a final rule (Rescission
Rule) rescinding the 2020 Rule.\104\ In the Rescission Rule, the
Department explained that the 2020 Rule's reliance on section 3(d)
alone among the FLSA's provisions for its vertical joint employment
analysis was not supported by the FLSA's text or Congressional intent,
particularly as the Department had never previously excluded FLSA
sections 3(e) and (g) from the joint employment analysis and had
instead applied an analysis that included the definitions of ``employ''
or ``employee'' when determining joint employment.\105\ The Department
further explained that the vertical joint employment analysis in the
2020 Rule, and particularly its reliance on section 3(d) alone as the
statutory basis for joint employment, did not encompass all scenarios
in which joint employment could arise because two employers may
``suffer or permit'' an employee to work and thus be joint employers
under section 3(g) without one employer working ``in the interest of an
employer'' under section 3(d).'' \106\ The Department also explained
that, by focusing on the potential joint employer's actually-exercised
control over the employee, the 2020 Rule's vertical joint employment
analysis was contrary to the FLSA and
[[Page 21884]]
longstanding case law.\107\ The Department additionally stated that the
2020 Rule ``did not sufficiently take into account prior WHD
guidance,'' including its MSPA joint employment regulation.\108\ Noting
that ``[t]he MSPA regulation provides that `[j]oint employment under
the Fair Labor Standards Act is joint employment under the MSPA' and
sets forth a multi-factor analysis for determining vertical joint
employment that is different than the [2020] Rule's analysis,'' the
Department determined that the 2020 Rule nonetheless ``did not address
or account for any differences between its new regulatory standard and
MSPA's existing regulatory standard or any effects that it may have on
joint employment under MSPA.'' \109\
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\104\ Rescission of Joint Employer Status Under the Fair Labor
Standards Act Rule, Final Rule, 86 FR 40939 (July 30, 2021). On
March 12, 2021, the Department had published a notice of proposed
rulemaking proposing to rescind the 2020 Rule. See Rescission of
Joint Employer Status Under the Fair Labor Standards Act Rule, NPRM,
86 FR 14038 (Mar. 12, 2021).
\105\ See 86 FR 40942-49.
\106\ Id. at 40944-46.
\107\ Id. at 40946-47.
\108\ Id. at 40947-49.
\109\ Id. at 40948 (quoting 29 CFR 500.20(h)(5)(i)) (internal
footnotes omitted).
---------------------------------------------------------------------------
For horizontal joint employment, the 2020 Rule had adopted the
standard in the 1958 version of 29 CFR 791.2 with non-substantive
revisions. The Rescission Rule explained that the 2020 Rule's
``horizontal joint employment standard focused on the degree of the
employers' association with respect to the employment of the employee,
reflected the Department's historical approach to the issue, and was
consistent with the relevant case law.'' The Department considered
retaining the 2020 Rule's horizontal joint employment analysis because
of its consistency with prior guidance but rescinded the entire 2020
Rule because the 2020 Rule had ``intertwined [its] horizontal joint
employment provisions with [its] vertical joint employment provisions
in 29 CFR 791.2.'' The Department reiterated that rescission was not
intended to be a reconsideration of its longstanding horizontal joint
employment analysis and that the ``focus of a horizontal joint
employment analysis will continue to be the degree of association
between the potential joint employers, as it was in the [2020] Rule and
the prior version of part 791.'' \110\
---------------------------------------------------------------------------
\110\ Id. at 40954.
---------------------------------------------------------------------------
The Rescission Rule removed and reserved Part 791 in its entirety
effective October 5, 2021.\111\
---------------------------------------------------------------------------
\111\ Id. at 40957; see also 86 FR 52412-13 (noting the
effective date of the 2020 Rule's rescission).
---------------------------------------------------------------------------
I. Resolution of the Appeal
The Department filed an opening brief with the Second Circuit in
support of the 2020 Rule on January 15, 2021.\112\ The Intervenors
filed their opening brief on the same day.\113\ On March 31, 2021,
following the change in administration, the Department filed a motion
seeking to hold the appeal in abeyance in light of the proposal that it
had published to rescind the 2020 Rule.\114\ The Second Circuit denied
the motion.\115\ The States filed their response brief on April 16,
2021.\116\ The Intervenors filed their reply brief on May 7, 2021.\117\
On May 28, 2021, the Department filed a reply brief.\118\ In its reply
brief, the Department explained that the rulemaking proposing to
rescind the 2020 Rule may moot the States' challenge to that rule,
making any resolution of the appeal unnecessary.\119\ The Department
took no position on the merits of the 2020 Rule in its reply brief. The
Department argued that if the Second Circuit resolves the appeal, it
should reverse the district court's decision on the grounds that the
States had no standing to challenge the 2020 Rule.\120\
---------------------------------------------------------------------------
\112\ New York v. Walsh, No. 20-3806 (2d Cir. 2021) (No. 58).
\113\ Id. (No. 59).
\114\ Id. (No. 90).
\115\ Id. (No. 97).
\116\ Id. (No. 101).
\117\ Id. (No. 118).
\118\ Id. (No. 121).
\119\ Id. (No. 121, at p. 11).
\120\ Id. (No. 121, at p. 2-7).
---------------------------------------------------------------------------
On October 6, 2021, following the effective date of the Rescission
Rule, the Department filed a motion with the Second Circuit seeking to
dismiss the appeal because the Department's rescission of the 2020 Rule
had eliminated the States' dispute with the Department and had rendered
the case moot.\121\ On October 29, 2021, the Second Circuit granted the
motion to dismiss the appeal and vacated the district court's order and
judgment.\122\
---------------------------------------------------------------------------
\121\ Id. (No. 128, at p. 5).
\122\ Id. (No. 145).
---------------------------------------------------------------------------
J. Recent Opinion Letter
On September 30, 2025, WHD issued Opinion Letter FLSA2025-5,
addressing whether a restaurant and members club for whom an employee
worked separate hours are horizontal joint employers based on the facts
presented.\123\ The opinion letter reiterated that horizontal joint
employment ``typically occurs when employers are sufficiently
associated with respect to the employment of the particular
employee(s),'' including where there is an arrangement between the
employers to share an employee's services or interchange
employees.\124\ The letter concluded that the restaurant and members
club are horizontal joint employers because they ``are sufficiently
associated with each other with respect to [the employee's]
employment.'' \125\
---------------------------------------------------------------------------
\123\ See <a href="https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA-2025-05.pdf">https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA-2025-05.pdf</a>.
\124\ Id. at 2.
\125\ Id. at 2-3.
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II. Need for Rulemaking
The Department believes that regulations addressing joint
employment is necessary to promote clarity and uniformity in the
Department's nationwide enforcement of federal wage and hour law. The
Department further believes that the proposed analysis in this NPRM
represents the best construction of the FLSA--and by extension the FMLA
and MSPA--with respect to determining joint employer status under those
statutes, follows the decisions of the Supreme Court, and is broadly
consistent with the commonality among varying approaches to joint
employment in the federal circuit courts.
As noted above, for many decades, the Department maintained
interpretive guidance on joint employer status under the Act in Part
791. Since rescinding those regulations in 2021, despite suggesting
that the rescission did not abandon ``longstanding horizontal joint
employment analysis,'' \126\ the Department has provided no guidance on
the topic, apart from WHD Opinion Letter FLSA2025-5. The absence of any
direction has created uncertainty for businesses, workers, and courts,
particularly for ``vertical'' scenarios where multiple entities are
simultaneously benefiting from the same work performed by one or more
workers.\127\ In fact, the Department has not been applying a uniform
standard to assess vertical joint employment under the FLSA. Instead,
in each enforcement action, the Department attempts to apply a vertical
joint employment standard consistent with the judicial precedent that
may apply in that case, which--as described in this NPRM--varies
between federal courts.\128\ At a minimum, by clearly articulating the
Department's position and approach, this rulemaking would bring greater
uniformity and consistency to the
[[Page 21885]]
Department's enforcement actions by adopting a transparent nationwide
analysis, which could have benefits for all interested parties.
---------------------------------------------------------------------------
\126\ 86 FR 40954.
\127\ Although the 2021 Rescission Rule advised that the
Department would continue applying its ``longstanding horizontal
joint employment analysis,'' 86 FR 40954, the Rescission Rule did
not specify how the Department would investigate FLSA cases
involving possible vertical joint employment. WHD Opinion Letter
FLSA2025-5 addressed a scenario that constituted horizontal joint
employment.
\128\ Of course, the workers and employers encompassed in a
particular WHD investigation under the FLSA often do not fall neatly
within the geographic territories of the federal circuit courts. As
a result, the appropriate judicial framework (and thus the standard
that the Department would apply) may not be clear either as a
factual or legal matter.
---------------------------------------------------------------------------
Promulgating regulations on joint employment should improve the
Department's ability to enforce the FLSA, especially in cases involving
egregious child labor violations.\129\ Here, the Department believes
that it should make clear to employers and employees its position
regarding FLSA joint employment and provide publicly available
direction that its enforcement personnel could apply in those cases.
Making its position clear regarding the degree to which sometimes
sprawling supply chains may be deemed joint operations in published
regulations could make the resolution of such cases more likely. At the
very least, it would ensure that there is a common understanding
regarding the Department's position among workers, employers, and its
own enforcement personnel.
---------------------------------------------------------------------------
\129\ See Rebecca Rainey, Perdue, Tyson Face `Unique' Probe in
Child Labor Crackdown, Bloomberg Law (Oct. 10, 2023) (suggesting
that the absence of any ``official regulatory test on the books
governing the [Department]'s approach to joint employment'' could be
a ``potential hurdle'' in its investigation of child labor
violations involving meatpacking companies and their subcontractors
and staffing agencies).
---------------------------------------------------------------------------
Relatedly, a cohesive standard drawn from and consistent with
commonality between federal circuits would benefit the courts that hear
and decide joint employment issues in private FLSA lawsuits. According
to the Fourth Circuit, efforts by federal appellate courts to address
FLSA joint employment ``have spawned numerous multifactor balancing
tests, none of which has achieved consensus support'' among the
circuits that have addressed the issue.\130\ Still other circuits have
yet to adopt a definitive analysis. In this context, guidance from the
Department may be of help to courts as they develop and refine their
approaches to the issue. In addition, there are a number of federal
courts that have continued to cite to various iterations of Part 791
even though it has not existed since October 5, 2021,\131\ indicating a
willingness by courts to consider regulations from the Department.
Regulations from the Department that are current and in effect would
assist courts that look to the Department's position on FLSA joint
employment. That the proposed regulation would not bind or control the
courts--only Department investigators--is unremarkable. Courts have
always been the final word on the meaning and application of the law.
But, as noted above, regulations and guidance serve other purposes,
including public direction from the Department to its investigators
regarding how to apply a legal standard. The value of interpretative
rules has not been lost on the Supreme Court, which has noted that they
``constitute a body of experience and informed judgement to which
courts and litigants may properly resort for guidance,'' particularly
because such interpretations are ``based upon more specialized
experience and broader investigations and information than is likely to
come to a judge in a particular case.'' \132\
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\130\ Salinas, 848 F.3d at 135; see also Harris v. Med. Transp.
Inc., 300 F. Supp. 3d 234, 241-43 (D.D.C. 2018) (summarizing ``a
dizzying world of multi-factor tests'' from different circuits).
\131\ See, e.g., Guevara v. Lafise Corp., 127 F.4th 824, 831
(11th Cir. 2025) (citing 29 CFR 791.2(a)); Galvez v. Invest Cloud,
No. 23 Civ. 11301 (KPF), 2026 WL 165737, at *4 (S.D.N.Y. Jan. 21,
2026) (citing 29 CFR 791.2(a)); Ortiz v. Consolidated Edison Co.,
No. 1:22-CV-08957, 2025 WL 2717309, at *25 (S.D.N.Y. Sept. 24, 2025)
(citing 29 CFR 791.2(a)); Ennals v. Spencer Gifts Distrib. Ctr., No.
3:23-CV-00615-GMG, 2025 WL 2808951, at *2 (W.D.N.C. Sept. 30, 2025)
(citing 29 CFR 791.2(a)); Baquiax v. Abasushi Fusion Cuisine Inc.,
No. 16-cv-2997, 2023 WL 2647450, at *5 (S.D.N.Y. Mar. 27, 2023)
(citing 29 CFR 791.2(a)); Ludlow v. Flowers Foods, Inc., No. 18-CV-
1190, 2023 WL 2534618, at *3 (S.D. Cal. Mar. 15, 2023) (citing 29
CFR 791.2); Smith v. Bigtop Bingo, Inc., No. 3:21-CV-3083, 2023 WL
2889300, at *6 (N.D. Fla. Mar. 10, 2023) (citing 29 CFR 791.2);
Monroe v. Hayward Unified Sch. Dist., No. 22-CV-04489, 2023 WL
2480738, at *2-3 (N.D. Cal. Mar. 12, 2023) (citing the version of 29
CFR 791.2 that was promulgated in 1958 and recognizing that it had
been amended in 2020, and citing the version of 29 CFR 791.2 that
was promulgated by the 2020 Rule and recognizing that it has not
been in effect since October 5, 2021); Lambert v. Jariwala & Co.,
No. 18-CV-17295, 2023 WL 1883354, at *9 (D.N.J. Feb. 10, 2023)
(citing 29 CFR 791.2).
\132\ Skidmore v. Swift & Co., 323 U.S. 134, 139-40 (1944); see
also Loper Bright Enterprises v. Raimondo, 603 U.S. 369, 402 (2024)
(``In an agency case in particular, the court will go about its task
with the agency's `body of experience and informed judgment,' among
other information, at its disposal.'') (quoting Skidmore, 323 U.S.
at 140).
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The Department further believes that rulemaking is needed to ensure
that the standard for joint employment under FMLA and MSPA is
consistent with the FLSA joint employer standard. As noted earlier,
both the FMLA and MSPA explicitly incorporate the FLSA's definition of
employment, including the ``suffer or permit'' standard codified at
section 3(g) of the FLSA. Yet, WHD's existing regulations under the
FMLA and MSPA articulate different joint employer standards that vary
in their level of detail.\133\ The Department believes that aligning
the FMLA and MSPA regulations with the FLSA standard in a restored part
791 would reduce compliance burdens for employers, promote greater
awareness among workers of their rights, and ensure uniformity in WHD's
enforcement of its wage and hour laws.
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\133\ Compare 29 CFR 825.106(a) (FMLA) with 29 CFR 500.20(h)(5)
(MSPA). The Seventh Circuit has noted that the current FMLA
regulation, which closely resembles the Department's 1958 FLSA
regulation, ``does not . . . provide much guidance in determining
the parameters of what constitutes a joint-employment
relationship.'' Moldenhauer v. Tazewell-Pekin Consol. Commc'ns Ctr.,
536 F.3d 640, 644 (7th Cir. 2008).
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Additionally, the Department believes that unified joint employment
guidance could yield important practical benefits. Promulgating a
regulatory standard may assist businesses in determining any joint
employer responsibility when organizing their relationships and
contracts and deciding whether to adopt--or avoid--certain business
models and business practices.\134\ Workers, in turn, may be better
equipped to understand when multiple entities may share responsibility
for their wages and working conditions. The Department also expects, as
discussed in section VI.E., that clear regulatory guidance, if applied
by courts, may reduce litigation costs and may prevent some lawsuits
from being brought at all.
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\134\ See 85 FR 2853 (discussing comments during the
Department's 2019-20 rulemaking which ``agreed that the additional
clarity would promote business relationships'').
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Finally, this rulemaking is consistent with principles of good
government. By engaging in notice-and-comment rulemaking to restore
interpretive guidance on FLSA joint employer status in part 791, rather
than imposing a new standard in a memorandum or bulletin, the
Department ensures that its ultimate approach to the topic will have
benefited from the input of interested outside stakeholders. Soliciting
input from the public in the development of significant interpretive
guidance may enhance the persuasive power of such guidance,\135\ and is
also consistent with good governance recommendations from the
Administrative Conference of the United States and the Office of
Management and Budget (OMB).\136\ The
[[Page 21886]]
Department looks forward to receiving feedback on this proposed rule
and will consider any relevant ``written data, views, or arguments''
submitted by commenters during the notice-and-comment process. See 5
U.S.C. 553(c).
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\135\ See Loper Bright, 603 U.S. at 388 (advising that the
``weight'' of agency interpretive guidance depends in part ``upon
the thoroughness evident in its consideration'') (quoting Skidmore,
323 U.S. at 140); see also U.S. v. Mead Corp., 533 U.S. 218, 228
(2001) (noting that, among other factors, ``courts have looked to
the degree of the agency's care'' and ``formality'' in determining
the measure of deference to afford agencies' interpretations of
their statutes).
\136\ See Admin. Conf. of the U.S., Recommendation 2019-1,
Agency Guidance Through Interpretive Rules, at 7-8 (June 13, 2019)
(advising agencies to consider offering an opportunity for public
participation before or after the adoption or modification of an
interpretive rule), <a href="https://www.acus.gov/sites/default/files/documents/Agency%20Guidance%20Through%20Interpretive%20Rules%20CLEAN%20FINAL%20POSTED.pdf">https://www.acus.gov/sites/default/files/documents/Agency%20Guidance%20Through%20Interpretive%20Rules%20CLEAN%20FINAL%20POSTED.pdf</a>; see also Final Bulletin for Agency Good Guidance
Practices, OMB Bull. No. 07-02, at 9 (Jan. 18, 2007) (noting that
``interpretive rules of general applicability or statements of
general policy might be so consequential as to merit advance notice-
and-comment''), <a href="https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/memoranda/2007/m07-07.pdf">https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/memoranda/2007/m07-07.pdf</a>.
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III. Discussion of Proposed Regulatory Provisions
For all the reasons discussed above, the Department proposes to
issue regulations providing interpretive guidance to its enforcement
personnel, and workers and employers in the regulated community, for
determining joint employer status under the FLSA in Part 791, where it
was located prior to 2021. The Department's proposed framework and
analysis aligns with some aspects of the 2020 Rule, but includes
several important modifications, as discussed in greater detail below.
The proposed regulatory text in part 791 includes:
<bullet> an introductory provision at Sec. 791.100 explaining the
purpose of part 791;
<bullet> a provision at Sec. 791.105 describing general
principles;
<bullet> a provision at Sec. 791.110 describing two common
scenarios of FLSA joint employment, i.e., vertical and horizontal joint
employment, as well as the obligations of joint employers under the
FLSA;
<bullet> a provision at Sec. 791.115 providing the standard for
determining vertical joint employment under the FLSA;
<bullet> a provision at Sec. 791.120 providing the standard for
determining horizontal joint employment under the FLSA;
<bullet> a provision at Sec. 791.125 addressing the relevance of
certain business practices when determining joint employment under the
FLSA; and
<bullet> a severability provision at Sec. 791.130.
Additionally, the Department proposes to revise the regulations
addressing joint employer status under MSPA and the FMLA to apply the
analysis in part 791 when determining joint employer status under those
statutes. Specifically, the Department proposes to revise 29 CFR
500.20(h)(5) in the MSPA regulations and 29 CFR 825.106(a) in the FMLA
regulations to replace the analyses there with cross-references to Part
791, and to ensure that they are otherwise consistent with Part 791.
Finally, the Department proposes to amend 29 CFR 780.305(c) and 29 CFR
780.331(d) so that those provisions, which address FLSA joint
employment in certain agricultural settings, also cross-reference to
the FLSA analysis in Part 791.
As noted above and for the reasons provided herein, the Department
believes this proposed analysis represents the best construction of the
FLSA--and by extension the FMLA and MSPA--with respect to determining
joint employer status under those statutes, adheres to Supreme Court
precedent, and is generally consistent with the commonality between the
various tests applied by the federal courts of appeals.
A. Introductory Statement (Proposed Sec. 791.100)
The Department proposes to readopt as Sec. 791.100 (with minor,
non-substantive revisions) the regulatory text from the 2020 Rule which
provided an introductory statement at the beginning of the regulatory
provisions.\137\ The introductory statement would advise that: part 791
contains the Department's ``general interpretations of the text
governing joint employer status under the [FLSA]''; the WHD
Administrator will use the interpretations ``to guide the performance
of his or her duties under the FLSA'' and intends them ``to be used by
employers, employees, and courts to understand employers' obligations
and employees' rights under the FLSA''; any prior inconsistent or
conflicting ``administrative rulings, interpretations, practices, or
enforcement policies relating to joint employer status under the FLSA''
are rescinded; and employers may rely on the interpretations to satisfy
the good faith reliance defense in the Portal-to-Portal Act (29 U.S.C.
259), notwithstanding that after any such act or omission in the course
of such reliance, any such interpretation is modified or rescinded or
is determined by judicial authority to be invalid or of no legal
effect.
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\137\ 29 CFR 791.1 (2020).
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The Department believes that this introductory statement would
provide clarity as to how WHD intends to use part 791 and how
employers, businesses, workers, and courts should use part 791. The
introductory statement would also address how part 791 relates to prior
interpretations, providing further clarity to the public. And the
introductory statement would explain how employers can rely on part 791
for purposes of the good faith reliance defense in the Portal-to-Portal
Act.
The Department welcomes comments on all aspects of its proposed
introductory statement.
B. General Principles (Proposed Sec. 791.105)
In proposed Sec. 791.105, the Department would introduce the basic
concept of FLSA joint employment and explain some relevant general
principles.
Proposed Sec. 791.105(a) addresses, as a general matter, who or
what constitutes an employer under the Act, explaining that an
``employer or joint employer may be an individual, partnership,
association, corporation, business trust, legal representative, public
agency, or any organized group of persons, excluding any labor
organization (other than when acting as an employer) or anyone acting
in the capacity of officer or agent of such a labor organization.'' The
broad conception of an employer is required by subsection 203(d) of the
Act, which defines an ``employer'' under the FLSA as including ``any
person acting directly or indirectly in the interest of an employer in
relation to an employee'' (emphasis added) including a ``public
agency,'' but not including ``any labor organization (other than when
acting as an employer) or anyone acting in the capacity of officer or
agent of such labor organization,'' as well as subsection 203(a), which
defines a ``person'' under the FLSA as ``an individual, partnership,
association, corporation, business trust, legal representative, or any
organized group of persons.'' As the Department explained in the 2020
Rule, incorporating the FLSA's definition of ``person'' into the
proposed regulatory text is appropriate to encompass the meaning of
employer set forth in the statutory text. Indeed, just like an
``employer'' under the FLSA, ``every kind of person contemplated by the
[FLSA]'' can be a joint employer under the FLSA assuming that the
person otherwise satisfies the Department's joint employer
standard.\138\ Proposed Sec. 791.105(a) is nearly identical to Sec.
791.2(d)(1) of the 2020 Rule without the citation to 29 U.S.C. 203(a)
and (d).
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\138\ 85 FR 2839.
---------------------------------------------------------------------------
Proposed Sec. 791.105(b) provides that ``an employee may have
multiple employers under the FLSA,'' recognizing the reality that many
employees have more than one distinct employer. Yet this fact, by
itself, does not implicate joint employment. Proposed Sec. 791.105(b)
confirms as much, explaining that, in ``most cases,
[[Page 21887]]
each employment will be distinct from the others, and each employer
will be responsible on its own for complying with the FLSA with respect
to the employee.'' Most employees with more than one employer work
separate and distinct jobs for each. Indeed, in most cases an
employee's work for one employer will have no impact on that employee's
employment relationship with another employer, thus not raising joint
employment implications. Proposed Sec. 791.105(b) further explains
that, in some circumstances, however, ``two or more employers may
employ the employee in a manner that makes them joint employers of the
employee such that they are together responsible for complying with the
FLSA with respect to the employee.'' Those circumstances--joint
employment under the Act--are described later in the regulation.
Proposed Sec. 791.105(c) explains that FLSA joint employment
exists only among and between two or more employers that are separate
entities--``[f]or there to be joint employment, each employer must
exist as a separate entity.'' This is distinct from circumstances in
which an employee is allegedly employed by two nominally separate
entities, but in fact, the entities are not separate and distinct, but
rather one entity and employer. As a result, the employee is simply
employed by a single employer responsible for FLSA compliance with
respect to that employee. Proposed Sec. 791.105(c) acknowledges these
situations by providing that, in some cases, ``it may be unnecessary to
consider joint employment because the entities constituting the alleged
employers are in fact a single entity and thus a single employer for
purposes of FLSA compliance.'' The subsection continues with an
example, noting that ``if two entities are separately incorporated but
effectively operate as a single entity, they may in fact be a single
employer under the FLSA.'' It explains that ``[n]either incorporating a
separate entity nor manipulating corporate formalities may be used to
divide a business' operation and avoid the FLSA's requirements,'' and
that ``[c]losely-related entities that are not in fact separate may be
liable as a single employer under the FLSA without needing to consider
joint employment.''
When an employee is allegedly employed by multiple entities that
may not truly be separate entities, evaluating whether the entities are
one entity and thus a single employer under the FLSA should be
considered before applying any joint employment analysis. See WHD
Opinion Letter FLSA2025-5 (Sept. 30, 2005) (explaining that, as an
alternative to considering joint employment, ``[s]eparately
incorporated entities may be considered a single employer . . . for
purposes of compliance with the FLSA''). As noted above, joint
employment exists only between two or more separate and distinct
entities. Where multiple putative employers are actually or effectively
a single entity, it is a single employer solely responsible for
complying with the FLSA with respect to the work performed by the
employee (including aggregating the employee's hours worked attributed
to each entity to determine any overtime premium due under the FLSA),
and a joint employment analysis is not appropriate.\139\
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\139\ Proposed Sec. 791.105(c) notes that ``it may be
unnecessary to consider joint employment'' to the extent nominally
separate ``entities constituting the alleged employers are in fact a
single entity and thus a single employer for purposes of FLSA
compliance.'' Likewise, under a longstanding FMLA regulatory
provision, ``[s]eparate entities'' may be ``deemed to be parts of a
single employer for purposes of FMLA if they meet the integrated
employer test.'' See 29 CFR 825.104(c)(2) (detailing that test
including its factors to consider). This proposal would not change
29 CFR 825.104(c)(2).
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The Department welcomes comment on all aspects of proposed Sec.
791.105.
C. Two Scenarios of FLSA Joint Employment (Proposed Sec. 791.110)
Proposed Sec. 791.110 addresses the related concepts of
``vertical'' and ``horizontal'' joint employment, using plain language
to the extent possible, so these scenarios are generally understandable
to a significant portion of small business owners and employees.\140\
Proposed Sec. 791.110 also addresses certain ramifications under the
FLSA if two employers or entities are joint employers of one or more
employees, notably explaining that they are jointly and severally
liable for compliance with the FLSA with respect to employees jointly
employed.
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\140\ The 2020 Rule did not use ``vertical'' and ``horizontal,''
electing instead to use the labels ``first joint employment
scenario'' (vertical) and ``second joint employment scenario''
(horizontal). 29 CFR 791.2(a) and (e) (2020). These phrases, albeit
comprised of ostensibly simpler words, ultimately obfuscated and
confounded relevant concepts. In the years since, courts, workers,
businesses, and others have continued to use the ``vertical'' and
``horizontal'' terminology. Accordingly, the Department uses these
more precise terms in this rulemaking.
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As described in proposed Sec. 791.110(a), vertical joint
employment generally describes an arrangement in which an employee ``is
jointly employed by two or more employers that simultaneously benefit
from the employee's work.'' The subsection explains that, in a typical
vertical joint employment situation, ``the employee works one set of
hours and there is no dispute that the employee has at least one
employer for the work,'' and ``the issue is whether another person that
also benefits from the work is the employee's joint employer.'' \141\
Continuing, the proposed provision adds that this ``scenario is
described as `vertical' because it often centers around whether
business partners which are higher or lower in a particular industry
structure--such as contractors and subcontractors or staffing agencies
and their clients--are joint employers of the employee.''
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\141\ This is consistent with the 2020 Rule which described this
scenario (labeling it the ``first'' scenario) as involving a worker
who was unquestionably the employee of one employer and whose work
for that employer simultaneously benefits another person, and the
issue is whether that other person is also the employee's employer.
85 FR 2827.
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[[Page 21888]]
[GRAPHIC] [TIFF OMITTED] TP23AP26.000
Importantly, vertical joint employment can encompass work
arrangements involving parties of varying sizes and resources,
including agents or intermediaries who act on behalf of one or more
employers. In the Department's experience in FLSA cases, vertical joint
employment often involves a higher-tier entity, such as a staffing
agency client or general contractor, that disputes whether it has an
employment relationship with workers who are unquestionably employees
of a lower-tier entity, such as a staffing agency or subcontractor,
that has a business relationship with the higher-tier entity.\142\ As
the lower-tier entity is indisputably an employer in such
circumstances, the vertical joint employment analysis focuses on the
higher-tier entity's relationship with the employees of the lower-tier
entity to determine whether the higher-tier entity has an employment
relationship with said employees, that is, constitutes a joint employer
of them. See generally Figure A above.
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\142\ Notwithstanding the Department's experience and the more
ubiquitous situation above, sometimes the entity disputing its
status as a vertical joint employer is the lower-tier entity--often
a subcontractor, staffing agency, or similar business. See, e.g.,
Falk, 414 U.S. at 192-95 (concluding that a company that
``render[ed] management services for the owners of a number of
apartment complexes'' was a joint employer); Hodgson v. Arnheim &
Neely, Inc., 444 F.2d 609, 610-12 (3d Cir. 1971), rev'd on other
grounds, 410 U.S. 512 (1973) (concluding that a similar real estate
management company was a joint employer); Baystate Alternative
Staffing, Inc. v. Herman, 163 F.3d 668, 674-76 (1st Cir. 1998)
(affirming that a temporary staffing agency was a joint employer).
However, more typically the entity at issue in a vertical joint
employment case is the business client of a subcontractor or
staffing agency.
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This makes sense in a vertical joint employment scenario because,
in situations where employees perform work that simultaneously benefits
two separate businesses, the only degree of association between the
business partners may be a contractual agreement between them whereby
one provides services or labor or both to the other. In this vertical
context, focusing on the association between the different businesses
likely would not be probative, as such typical contractual business
arrangements between companies do not themselves create joint
employment liability under the FLSA. Zheng, 355 F.3d at 76 (explaining
that the FLSA's employment definitions were ``manifestly not intended
to bring normal, strategically-oriented contracting schemes within the
ambit of the [statute]''). However, when the putative joint employer's
relationship with the employees is such that it functions as an
employer of the employees, rather than a mere business partner of the
other employer, the two entities are joint employers under the FLSA.
Id.
As described in proposed Sec. 791.110(b), horizontal joint
employment generally involves situations in which an employee works
separate hours for two or more joint employers in the same workweek,
``and the employers are sufficiently associated with each other with
respect to the employment of the employee such that they are joint
employers.'' The proposed subsection explains that, in a typical
horizontal joint employment situation, ``it is undisputed that each
employer employs the employee for some hours worked, and the issue is
whether the employers are sufficiently associated with each other with
respect to the employment of the employee.'' \143\
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\143\ This is consistent with the 2020 Rule, in which the
Department explained that focusing on the relationship between the
two employers is the correct approach in this scenario given that
the employee is indisputably employed by both employers and works
separate jobs and hours for each employer. 85 FR 2845.
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[[Page 21889]]
[GRAPHIC] [TIFF OMITTED] TP23AP26.001
Consistent with caselaw, subsection 791.110(b) adds that, when
there is horizontal joint employment, an employee's total hours worked
across the workweek for each of the employers ``must be aggregated for
purposes of FLSA compliance, and each employer is jointly and severally
liable for the employee's wages due under the FLSA, including any
overtime premiums due based on the aggregated hours worked.'' See,
e.g., Chao v. A-One Med. Servs., Inc., 346 F.3d 908, 918 (9th Cir.
2003); Wirtz v. Hebert, 368 F.2d 139, 141 (5th Cir. 1966); Mid-
Continent Pipe Line Co. v. Hargrave, 129 F.2d 655, 658-59 (10th Cir.
1942).
The analysis centers on the employers' relationship, which makes
sense in the horizontal joint employment scenario because the employee
is unquestionably employed by each employer, and the issue is the
relationship between the employers. See Figure B above. In these
circumstances, focusing on the employee would not be probative of the
relationship between the employers; instead, analyzing the association
(or lack thereof) between the employers is indicative of whether they
jointly employ the employee and, therefore, must aggregate the hours
worked by the employee for each of them.
Proposed Sec. 791.110(c) provides that, for ``each workweek that a
person is a joint employer of an employee, that joint employer is
jointly and severally liable with any other joint employers for
compliance with all of the applicable provisions of the FLSA . . . for
all of the hours worked by the employee in that workweek.'' As the
Department explained in its proposal that became the 2020 Rule, joint
and several liability means that ``all joint employers are each fully
responsible for the entire amount of minimum wages and overtime pay due
to the employee in the workweek,'' and that ``[i]f one of them is
unable or unwilling to pay, the others are responsible for the full
amount owed.'' \144\ Proposed Sec. 791.110(c) further provides that,
``[i]n discharging this joint obligation in a particular workweek, each
joint employer may take credit toward minimum wage and overtime pay
requirements for all payments made to the employee by any other joint
employer.'' In the 2020 Rule, the Department explained that this
``merely restates the longstanding principle of joint and several
liability under the [FLSA],'' and that it received no comments
regarding this guidance.\145\ Proposed Sec. 791.110(c) would be the
same as Sec. 791.2(f) of the 2020 Rule with minor, non-substantive
revisions.
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\144\ 84 FR 14045 n.11.
\145\ 85 FR 2845.
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The Department welcomes feedback on all aspects of proposed
791.110.
D. Determining Vertical Joint Employment (Proposed Sec. 791.115)
Proposed Sec. 791.115 provides the Department's standard for
determining vertical joint employment. As explained below, the proposed
standard generally resembles the standard previously provided on
vertical joint employment from the 2020 Rule, though with several
important changes.
1. Four Factors To Apply (Proposed Sec. 791.115(a))
Vertical joint employment may occur where an employee is employed
by an employer for work, and another person--or entity--simultaneously
benefits from that work as, or in the manner of, an employer. Proposed
Sec. 791.115(a) provides four factors to determine whether the other
person is the employee's joint employer in that vertical joint
employment scenario. Those four factors are whether the other person or
entity: (1) hires or fires the employee; (2) supervises and controls
the employee's work schedule or conditions of employment to a
substantial degree; (3) determines the employee's rate and method of
payment; and (4) maintains the employee's employment records.
In the typical vertical joint employment scenario, the worker is
undoubtedly an employee under the FLSA, has an employer, and works one
set of hours for that employer. The issue is whether another person or
entity who also benefits from the employee's work also benefits from
that work as, or in the manner of, an employer. If so, the other person
or entity is the employee's employer too and, therefore, is jointly and
severally liable to compensate the employee for all hours worked. The
2020 Rule illustrated vertical joint employment with examples,
including ``where the employer is a subcontractor or staffing agency,
and the other person is a general contractor or staffing agency
client.'' \146\
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\146\ 85 FR 2828.
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The four factors identified in proposed Sec. 791.115(a) weigh the
economic reality of the potential joint employer's control, direct or
indirect, over the employee and would provide needed clarity and
uniformity to the determination.\147\ These factors capture the precise
types of indicators that the Supreme Court found to be dispositive of
joint employer status in Falk. There, the management company hired,
supervised, and paid the employees at issue, who were clearly employees
of the building owners.\148\ Citing the
[[Page 21890]]
``expansiveness'' of the FLSA's definition of ``employer'' in section
3(d) as well as its definition of ``employee'' in section 3(e), the
Court concluded that the management company's ``substantial control of
the terms and conditions of the work of these employees'' made it a
joint employer of the employees.\149\ Substantial control is the
standard set by the Court in Falk. The Court has not revisited its
decision in Falk, nor has it revised the vertical joint employment
standard it announced in that case, or otherwise addressed joint
employment under the Act. The factors proposed by the Department align
with the standard that the Supreme Court determined to be dispositive
in Falk.
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\147\ See id. at 2830.
\148\ 414 U.S. at 193 (``These employees work under the
supervision of [the management company] and are paid from the
rentals received at the apartment complexes where they are
employed.''), n.4 (noting that the management company was
responsible for ``hiring and supervising all employees required for
the operation and maintenance of the buildings and grounds'').
\149\ Id. at 195.
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Not only do the proposed factors epitomize the substantial control
standard in Falk, they also derive from, and align with, Bonnette, the
seminal appellate court decision addressing FLSA joint employment.
Citing Falk, the Ninth Circuit in Bonnette explained that ``[t]wo or
more employers may jointly employ someone for purposes of the FLSA''
and that ``[a]ll joint employers are individually responsible for
compliance with the FLSA.'' \150\ The Ninth Circuit further explained
that ``[t]he ultimate determination must be based `upon the
circumstances of the whole activity.' '' \151\ The Ninth Circuit
identified as determinative whether the potential joint employer: (1)
had the power to hire and fire the employees, (2) supervised and
controlled employee work schedules or conditions of employment, (3)
determined the rate and method of payment, and (4) maintained
employment records.\152\ It added that, ``[i]n varying combinations,
these factors have been considered by other courts for the same
purpose.'' \153\ The Ninth Circuit applied those four factors and
concluded that the counties were joint employers because they
``exercised considerable control over the nature and structure of the
employment relationship'' and ``also had complete economic control over
the relationship.'' \154\
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\150\ 704 F.2d at 1469 (citing 414 U.S. at 195).
\151\ Id. at 1470 (citing Rutherford Food, 331 U.S. at 730).
\152\ Id. at 1470.
\153\ Id. (citing cases).
\154\ Id. at 1470.
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In addition, the factors proposed by the Department also are
consistent with its earliest interpretations of vertical joint
employment. For example, in 1973 the Department published regulations
addressing vertical joint employment under the FLSA in the context of
farmers and labor contractors or crew leaders who supply harvest hands
and other laborers to the farmers.\155\ Assuming the labor contractor
or crew leader is an independent contractor of the farmer and employs
the laborers, those regulations provide that the farmer is a joint
employer ``if the farmer has the power to direct, control or supervise
the work, or to determine the pay rates or method of payment'' for the
laborers.\156\ And in both 1983 and 1993, when the Department published
its first regulations providing factors for determining vertical joint
employment under MSPA and the FMLA contemporaneous with each statute's
enactment, the Department identified factors addressing control,
supervision, determining pay rates and methods of payment, hiring and
firing, and payroll records \157\--just like the factors that the
Department is proposing in this NPRM.
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\155\ 38 FR 27520-21 (Oct. 4, 1973) (adding 29 CFR 780.305(c)
and revising 29 CFR 780.331(d)).
\156\ See 29 CFR 780.305(c), 780.331(d).
\157\ 48 FR 36745 (Sec. 500.20(h)(4)(ii)(A)-(E)) (MSPA); 58 FR
31814 (Sec. 825.106(a)(1)-(5)) (FMLA).
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Notably, the Department's proposed multi-factor balancing test is
like the tests applied by many courts, which, like the Department's
test, derive from Bonnette. For example, the First Circuit applied the
Bonnette factors in Baystate Alternative Staffing,\158\ and the Fifth
Circuit applied the Bonnette factors in Gray v. Powers.\159\ Similarly,
the Third Circuit has explained that ``a determination of joint
employment `must be based on a consideration of the total employment
situation and the economic realities of the work relationship,' ''
\160\ and that ``significant control'' is the standard for determining
joint employment.\161\ Relying on Bonnette, the Third Circuit
articulated four factors that ``are not materially different'' from the
Bonnette factors.\162\
---------------------------------------------------------------------------
\158\ 163 F.3d at 675.
\159\ 673 F.3d 352, 355-57 (5th Cir. 2012). Although Gray
involved whether an individual owner of the employer corporation was
jointly liable under the FLSA, the court noted that it ``must apply
the economic realities test to each individual or entity alleged to
be an employer and each must satisfy the four part test.'' Id. at
355 (emphasis added) (quotation marks and citation omitted). As the
2020 Rule noted (85 FR 2831 n.57), two older Fifth Circuit decisions
applied a different test to determine whether an entity was a joint
employer under the FLSA, and the Fifth Circuit has not yet overruled
those decisions--creating some uncertainty about what joint employer
test applies in the Fifth Circuit. See Hodgson v. Griffin & Brand of
McAllen, Inc., 471 F.2d 235, 237-38 (5th Cir. 1973); Wirtz v. Lone
Star Steel Co., 405 F.2d 668, 669-70 (5th Cir. 1968). Similar to
Bonnette, those older decisions considered how much control the
potential joint employer exerts over the employee and whether it has
the power to fire, hire, or modify the employment conditions of the
employee.
\160\ In re Enterprise Rent-A-Car Wage & Hour Emp't Practices
Litig., 683 F.3d 462, 469 (3d Cir. 2012) (quoting Bonnette, 704 F.2d
at 1470); see also Burrell v. Staff, 60 F.4th 25, 43-48 (3d Cir.
2023); Talarico v. Pub. Partnerships, LLC, 837 F. App'x 81, 84-86
(3d Cir. 2020); Fischer v. Fed. Express Corp., 509 F. Supp. 3d 275,
290 (E.D. Pa. 2020), aff'd 42 F.4th 366 (3d Cir. 2022); Thompson v.
Real Estate Mortg. Network, 748 F.3d 142, 149 (3d Cir. 2014).
\161\ Enterprise Rent-A-Car, 683 F.3d at 468 (``Ultimate control
is not necessarily required to find an employer-employee
relationship under the FLSA, and even indirect control may be
sufficient. In other words, the alleged employer must exercise
significant control.'') (internal quotation marks omitted).
\162\ Id. at 468-470.
---------------------------------------------------------------------------
Although the Sixth, Seventh, and Eighth Circuits have not issued
definitive FLSA joint employment decisions, they have issued decisions
suggesting that Bonnette is the basis for determining joint employment.
The Sixth Circuit applied the Bonnette factors to determine whether the
plaintiff, whose employer was a governmental entity that was immune
from the suit, was also employed by another entity.\163\ The Sixth
Circuit added that the other entity was not the plaintiff's joint
employer under the 2020 Rule, which ``focuses on the same factors.''
\164\ Some district courts within the Sixth Circuit have cited that
decision to apply the Bonnette factors in joint employment cases.\165\
The Seventh Circuit, in an FMLA decision in which it relied heavily on
FLSA principles, indicated that joint employment depends on the amount
of control exercised over the employee and that the Bonnette factors
are relevant, although not exclusive, when assessing control.\166\
District courts within the
[[Page 21891]]
Seventh Circuit generally apply the Bonnette factors in FLSA joint
employment cases.\167\ The Eighth Circuit has suggested that joint
employment under the FLSA is determined by analyzing economic realities
factors such as the potential joint employer's ``right to control the
nature and quality of the work,'' its ``right to hire or fire,'' and
``the source of compensation for the work.'' \168\ District courts
within the Eighth Circuit generally apply the Bonnette factors.\169\
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\163\ See Rhea v. W. Tennessee Violent Crime & Drug Task Force,
825 F. App'x 272, 275-77 (6th Cir. 2020) (concluding that the other
entity was not the plaintiff's employer because it ``did not have
control over the key `economic' aspects of [his] employment'').
\164\ Id. at 277 n.4.
\165\ See Hamm v. Acadia Healthcare Co., No. 3:21-CV-00550, 2022
WL 3129033, at *5 (M.D. Tenn. Aug. 4, 2022) (citing Rhea, 825 F.
App'x at 275-77); Gowey v. True Grip & Lighting, Inc., 520 F. Supp.
3d 1013, 1022-24 (E.D. Tenn. 2021) (same); see also Smith v. Guidant
Glob. Inc., No. 19-CV-12318, 2019 WL 6728359, at *3 (E.D. Mich. Dec.
11, 2019) (applying the Bonnette factors). Some other district
courts within the Sixth Circuit have applied variations of the
Bonnette factors. See Holmer v. Alcove Ventures, LLC, No. 1:23-CV-
747, 2024 WL 4350906, at *10 (N.D. Ohio Sept. 30, 2024) (applying a
three-factor test considering (1) authority to hire, fire and
discipline; (2) control over employees' pay and insurance; and (3)
supervision); Carson v. Ever-Seal, Inc., No. 3:22-CV-00205, 2024 WL
2060130, at *5 (M.D. Tenn. May 7, 2024) (applying Bonnette-like
factors plus additional factors including whether the employee is an
integral part of the putative employer's operation).
\166\ Moldenhauer, 536 F.3d at 643-45. In a decision the prior
year though, the Seventh Circuit affirmed a finding of joint
employment in an FLSA/MSPA case, finding that the facts of the case
squarely fit those in Rutherford Food and ruling that Rutherford
Food ``requires judgment in the workers' favor under the FLSA.''
Reyes v. Remington Hybrid Seed Co., 495 F.3d 403, 408-09 (7th Cir.
2007) (``Everything the Court said about boning [in Rutherford Food]
is true about detasseling and rogueing at Remington.'').
\167\ See, e.g., Egan v. A.W. Cos., No. 23 C 1148, 2024 WL
4382083, at *5 (N.D. Ill. Oct. 3, 2024) (citing Moldenhauer);
Patzfahl v. FSM ZA, LLC, No. 20-C-1202, 2021 WL 4912883, at *2-3
(E.D. Wis. Oct. 21, 2021) (same); Piazza v. New Albertsons, LP, No.
20-CV-03187, 2021 WL 365771, at *3 (N.D. Ill. Feb. 3, 2021) (same).
\168\ Ash v. Anderson Merchandisers, LLC, 799 F.3d 957, 961 (8th
Cir. 2015).
\169\ See, e.g., Winesburg v. Stephanie Morris Nissan, LLC, No.
2:22-CV-04157-MDH, 2023 WL 3901483, at *2 (W.D. Mo. June 8, 2023);
Padilla v. Caliper Bldg. Sys., LLC, No. 20-CV-00658, 2020 WL
5629837, at *3 (D. Minn. Sept. 21, 2020); Hampton v. Maxwell
Trailers & Pick-Up Accessories, Inc., No. 2:18CV110 HEA, 2019 WL
3766639, at *4 (E.D. Mo. Aug. 9, 2019).
---------------------------------------------------------------------------
The Department recognizes that some circuits apply a wider range of
factors, but the Bonnette factors nonetheless provide the foundation
for a number of those analyses. For example, the Ninth Circuit applies
the Bonnette factors it adopted plus eight additional factors.\170\ The
Second Circuit first applies the Bonnette factors to determine if the
potential joint employer has ``formal control'' over the workers such
that it is a joint employer; if not, the Second Circuit then looks at
six additional factors based on Rutherford Food to determine if the
potential joint employer has ``functional control'' over the workers
such that it is a joint employer.\171\ The Eleventh Circuit applies an
eight-factor analysis, the first five of which are similar to the
Bonnette factors.\172\ Finally, the Fourth Circuit has rejected the
Bonnette factors in favor of a novel test.\173\
---------------------------------------------------------------------------
\170\ Torres-Lopez, 111 F.3d at 639-40; see also Moreau v. Air
France, 356 F.3d 942, 950-52 (9th Cir. 2004) (FMLA case).
\171\ See Barfield v. New York City Health & Hosps. Corp., 537
F.3d 132 (2d Cir. 2008); Zheng v. Liberty Apparel Co., 355 F.3d 61
(2d Cir. 2003).
\172\ See Layton, 686 F.3d at 1175-77; see also Aimable v. Long
& Scott Farms, 20 F.3d 434, 443-44 (11th Cir. 1994).
\173\ Salinas, 848 F.3d at 137 (stating that Bonnette's
``reliance on common-law agency principles does not square with
Congress's intent that the FLSA's definition of `employee' encompass
a broader swath of workers than would constitute employees at common
law''); see also Hall v. DIRECTV, LLC, 846 F.3d 757, 769 (4th Cir.
2017) (``[Bonnette's] reliance on common-law agency principles
ignores Congress's intent to ensure that the FLSA protects workers
whose employment arrangements do not conform to the bounds of
common-law agency relationships.''). The D.C. Circuit recently
relied heavily on the Fourth Circuit's decision in Salinas to
develop a joint employment analysis in a case arising under the DC
Wage Payment and Collection Law, which defines employment to be
coextensive with the FLSA's definitions. See Mills v. Anadolu Agency
NA, Inc., 105 F.4th 388, 399 (D.C. Cir. 2024).
---------------------------------------------------------------------------
Thus, although there is variance in the analyses applied by federal
courts, the Bonnette factors are by far the closest thing to a common
denominator applied by courts when determining FLSA vertical joint
employment. By synthesizing this caselaw, identifying common factors,
and proposing a clear and straightforward analysis that incorporates
the Supreme Court's decision in Falk and the core commonality drawn
from that decision in the federal courts of appeals, the Department
aims to address this variance and encourage greater consistency and
uniformity for stakeholders. And although the Department's proposed
four factors are not exhaustive,\174\ the Department believes that an
analysis with fewer factors is preferable to, for example, the two-
step-and-10-total-factor, 12-factor, and 8-factor analyses applied by
the Second, Ninth, and Eleventh Circuits, respectively. These analyses
were developed and designed by and for courts, framed to be applied by
learned judges to resolve complicated questions of law in the context
of federal litigation. It is difficult for the Department to expect
that even the most diligent and conscientious workers and employers,
especially small businesses, would accurately and reliably apply these
analyses and tests in real time.\175\ For this reason, the Department
proposes a framework that distills the central questions, critical
factors, and relevant determinations from these tests into a structure
that reliably produces the outcomes of the judicial tests, but that
workers, and employers, and the Department's investigators may readily
and reasonably apply. To this end, the Department believes that the
greater the number of factors in a multi-factor test, the more complex
and difficult the analysis, and the greater the likelihood of errant or
inconsistent results in similar cases. By using factors that
generally--but by no means exclusively--focus on the potential joint
employer's control over the common terms and conditions of
employment,\176\ the Department believes that its proposed test will
assist stakeholders, guide its investigators, and help courts in
determining FLSA joint employer status with greater ease and
consistency. The Department suggests that the results will include
greater certainty both to employers and workers as to who is and is not
a joint employer under the FLSA before (or, indeed, without) any
litigation.
---------------------------------------------------------------------------
\174\ See section III.D.5., infra.
\175\ A worker or employer would have to identify the governing
appellate decision--including subsequent decisions--of the relevant
federal court of appeals. Once the proper cases have been
identified, the worker or employer would have to properly understand
and apply each factor often to nascent and developing business
arrangements--without the benefit of months of years of subsequent
discovery. Even assuming 8 or 12 factors were properly applied, the
worker or employer must weigh them against each other to reach the
correct legal conclusion.
\176\ The First Circuit observed that two of the four Bonnette
factors--examining whether the potential joint employer determines
the employee's rate or method of pay or maintains the employee's
employment records--``address . . . the economic aspects of the
working relationship.'' Baystate, 163 F.3d at 676. In this respect,
the four-factor Bonnette test is consistent with the Supreme Court's
focus on ``economic reality'' in cases construing the FLSA's
employment definitions. See Orozco, 757 F.3d at 448 (describing the
Fifth Circuit's four-factor test derived from Bonnette as ``the
economic reality test''); Enterprise Rent-a-Car, 683 F.3d at 469
(advising that the Third Circuit's four-factor test considers ``the
economic realities of the work relationship'') (quoting Bonnette,
704 F.2d at 1470-7l).
---------------------------------------------------------------------------
As noted above, the Department's proposed four factors are, in
fact, the Bonnette factors with some modifications. The Department's
first factor asks whether the potential joint employer hires or fires
employees, whereas the first Bonnette factor is whether the potential
joint employer has the ``power'' to hire and fire the employee. This
modification is consistent with courts' focus in practice on whether a
potential joint employer actually has hired or fired workers,\177\ as
well as their general focus on ``economic reality'' when assessing
employment relationships under the FLSA.\178\ However, as explained
below in the discussion of proposed Sec. 791.115(c), the potential
joint employer's reserved control nevertheless may be considered with
[[Page 21892]]
respect to any of the factors (although the potential joint employer's
actual exercise of control is more relevant), so the potential joint
employer's ``power'' to hire and fire may be considered even though the
Department's proposed first factor does not contain the word ``power.''
---------------------------------------------------------------------------
\177\ Compare, e.g., Baystate, 163 F.3d at 675 (concluding that
a staffing agency was a joint employer in part because it was
``solely responsible for hiring the temporary workers'') with
Aimable, 20 F.3d at 442 (concluding that a farm did not jointly
employ migrant farmworkers in part because the farm ``never mandated
that a particular individual be hired or fired'') and Orozco, 757
F.3d at 449 (concluding that a franchisor was not a joint employer
in part because the record ``[did] not prove that [he] hired or
fired employees'').
\178\ See Tony and Susan Alamo Found. v. Sec'y of Labor, 471
U.S. 290, 301 (1985) (``The test of employment under the [FLSA] is
one of `economic reality[.]' '') (quoting Goldberg v. Whitaker House
Coop., Inc., 366 U.S. 28, 33 (1961)).
---------------------------------------------------------------------------
The Department's second factor questions whether the potential
joint employer supervises and controls the employee's work schedule or
conditions of employment to a substantial degree, whereas the second
Bonnette factors does not contain ``to a substantial degree.'' Because
the facts underlying such supervision and control in a typical case do
not generally yield binary outcomes (i.e., total supervision/control or
a complete lack of supervision/control), the ``to a substantial
degree'' language simply reflects that there is some degree of such
supervision/control in the middle (i.e., that is more than occasional
and is in fact substantial) that tips this factor from not indicating
joint employment to indicating joint employment. This language is
consistent with the Supreme Court's holding in Falk that ``substantial
control of the terms and conditions of the work'' of the employees was
the touchstone for joint employer status.\179\
---------------------------------------------------------------------------
\179\ 414 U.S. at 195; see also Enterprise Rent-A-Car, 683 F.3d
at 468 (explaining that a joint employer ``must exercise
`significant control' '' (citation omitted)).
---------------------------------------------------------------------------
Proposed Sec. 791.115(a) also provides guidance on applying the
factors: ``No single factor is dispositive in determining joint
employer status under the FLSA, as the determination will depend on all
of the facts in a particular case.'' This proposed provision would be
similar to guidance provided in the 2020 Rule \180\ and consistent with
Bonnette, which explained that determining joint employment ``does not
depend on `isolated factors but rather upon the circumstances of the
whole activity.' '' \181\
---------------------------------------------------------------------------
\180\ 29 CFR 791.2(a)(3)(i) (2020) (``No single factor is
dispositive in determining joint employer status under the Act.
Whether a person is a joint employer under the [FLSA] will depend on
how all the facts in a particular case relate to these factors . . .
'')); see also 85 FR 2833 (explaining that ``all four factors need
not necessarily be satisfied in order for an entity to be deemed a
joint employer'' and that, ``consistent with case law, the four
factors represent a balancing test'').
\181\ 704 F.2d at 1469 (quoting Rutherford Food, 331 U.S. at
730).
---------------------------------------------------------------------------
The Department welcomes comments on all aspects of its proposed
four factors.
Finally, the 2020 Rule, in explaining the vertical joint employment
analysis that it adopted, stated that FLSA section 3(d)'s definition of
employer ``is the statutory basis for determining joint employer status
under the FLSA.'' \182\ The 2020 Rule further stated that FLSA section
3(e)'s definition of ``employee'' and section 3(g)'s definition of
``employ'' ``determine whether an individual worker is an employee
under the [FLSA]'' and do not provide a basis for determining joint
employment.\183\ Accordingly, the 2020 Rule's regulatory text cited 29
U.S.C. 203(d) and provided that, in the vertical joint employer
scenario, ``[t]he other person is the employee's joint employer only if
that person is acting directly or indirectly in the interest of the
employer in relation to the employee.'' \184\
---------------------------------------------------------------------------
\182\ 85 FR 2827-28.
\183\ Id.
\184\ 29 CFR 791.2(a)(1) (2020) (emphasis added).
---------------------------------------------------------------------------
But here the Department is not proposing that regulatory text from
the 2020 Rule or that section 3(d) is the exclusive statutory basis for
determining joint employment under the FLSA to the exclusion of
sections 3(e) and 3(g). Section 3(d)'s definition of ``employer'' as
including ``any person acting directly or indirectly in the interest of
an employer in relation to an employee'' is of course relevant when
considering joint employment under the FLSA. The Department recognizes,
however, that section 3(e)'s definition of ``employee'' and section
3(g)'s definition of ``employ'' as including ``to suffer or permit to
work'' are relevant too.
In the 2020 Rule, the Department explained that, ``[a]s the Supreme
Court has ruled, the [FLSA's] definition of `employ' was a rejection of
the common law standard for determining who is an employee under the
FLSA in favor of a broader scope of coverage.'' \185\ Having considered
the issue further, the Department notes that courts have found section
3(g) to also address joint employment. For example, the Eleventh
Circuit has stated that ``[t]he `suffer or permit to work' standard
derives from state child-labor laws designed to reach businesses that
used middlemen to illegally hire and supervise children.'' \186\ In
Rutherford Food, the Supreme Court held that the meat boners employed
by several intermediaries were, based on the facts of that case,
employees of the slaughter-house that benefitted from their work.\187\
In so doing, the Court cited sections 3(d), 3(e), and 3(g) as having
``some bearing,'' \188\ and added that the ``definition of `employ' is
broad'' and ``evidently derives from the child labor statutes.'' \189\
Similarly, the Court in Darden described section 3(e) as ``evidently
deriv[ing] from the child labor statutes'' and noted that the FLSA
``defines the verb `employ' expansively.'' \190\ Characterizing these
cases, the district court in Scalia stated that ``they [a]ll agreed
that the `middlemen' who directly employed children were their
employers'' and that ``[t]he only question was whether businesses that
`used' middlemen were also (joint) employers.'' \191\
---------------------------------------------------------------------------
\185\ 85 FR 2827 (citing Nationwide Mut. Ins. Co. v. Darden, 503
U.S. 318, 326 (1992); Walling v. Portland Terminal Co., 330 U.S.
148, 150-51 (1947)).
\186\ Antenor v. D & S Farms, 88 F.3d 925, 929 n. 5 (11th Cir.
1996) (citing Rutherford Food, 331 U.S. at 728 n.7; People ex rel.
Price v. Sheffield Farms-Slawson-Decker Co., 225 N.Y. 25, 29-31
(1918)).
\187\ 331 U.S. at 729-30.
\188\ Id. at 728 & n.6.
\189\ Id. at 728 & n.7 (citing the Department's brief in that
case).
\190\ Darden, 503 U.S. at 326 (citing Rutherford Food, 331 U.S.
at 728).
\191\ 490 F. Supp. 3d at 779.
---------------------------------------------------------------------------
For all these reasons, the Department recognizes that the FLSA's
employment definitions must be viewed together; none should be excluded
when considering potential joint employment. The Department welcomes
comments on this proposed approach.
2. Meaning of ``Employment Records'' (Proposed Sec. 791.115(b))
Proposed Sec. 791.115(b) is substantively similar to an analogous
provision in the 2020 Rule.\192\ The proposal defines ``employment
records''--a term used in the fourth proposed factor--to mean records,
such as payroll records, that reflect, relate to, or otherwise record
information pertaining to the hiring or firing, supervision and control
of the work schedules or conditions of employment, or determining the
rate and method of payment of the employee. The proposal provides that
records maintained by the potential joint employer related to the
employer's compliance with the contractual agreements identified in
Sec. 791.125 do not make joint employer status more or less likely
under the FLSA and are not considered employment records. For example,
if a company has a contractual agreement with a business partner
requiring certain quality control standards and the company documents
the efforts by the partner's employees to fulfill those standards,
those records would not be indicative of whether the company is a joint
employer of the partner's employees.
---------------------------------------------------------------------------
\192\ 29 CFR 791.2(a)(2) (2020).
---------------------------------------------------------------------------
The proposal further provides that the potential joint employer's
satisfaction of the maintenance of employment records factor alone will
not demonstrate joint employment. The Department believed, and
continues to be believe, that the maintenance of employment records
[[Page 21893]]
factor may be probative of joint employment and rejected requests to
delete the factor from the analysis when promulgating the 2020
Rule.\193\ The Department did note, however, that ``courts have not
found joint employer status when maintenance of employment records is
the only evidence to support such a finding.'' \194\ The Department
thus clarified that, although the maintenance of employment records is
a relevant factor, satisfaction of the fourth factor alone cannot lead
to a finding of joint employer status.\195\ The Department is not aware
of any reason or legal basis to support changing that approach. Where
an employer maintains the employee's employment records, but no other
factors indicate that the employer is a joint employer, the employment
records factor alone will not result in joint employment.
---------------------------------------------------------------------------
\193\ 85 FR 2832.
\194\ Id. (citing cases).
\195\ Id.
---------------------------------------------------------------------------
The Department welcomes comments on all aspects of its proposed
maintenance of employment records factor.
3. Relevance of Reserved Control (Proposed Sec. 791.115(c))
Proposed Sec. 791.115(c) states that the potential joint
employer's ability, power, or reserved right to act in relation to the
employee is relevant for determining joint employer status, but the
potential joint employer's actual exercise of control is more relevant
than such ability, power, or right. It further states, as an example,
that a potential joint employer's contractual authority to supervise,
discipline, or fire employees is less relevant if in practice the
potential joint employer never exercises such authority. The subsection
also clarifies that, although contractual authority is generally
relevant, a potential joint employer's ability, power, or reserved
right to act in connection with any of the contractual provisions or
business practices identified in Sec. 791.125 is not relevant. This
clarification is necessary to ensure that this proposal's general
consideration of contractual authority does not override the position
explained in Sec. 791.125 that authority with respect to certain
contractual provisions is not relevant to determining joint employer
status under the FLSA.
The Department recognizes that the potential joint employer's
ability, power, or reserved right to act in relation to the employee is
relevant for determining joint employer status. Consistent with the
``ultimate determination [being] based `upon the circumstances of the
whole activity,''' \196\ actual practices and contractual rights must
both be considered. Courts view the power to control the employee or
the work as an aspect of the joint employment determination.\197\
---------------------------------------------------------------------------
\196\ Bonnette, 704 F.2d at 1470 (quoting Rutherford Food, 331
U.S. at 730).
\197\ See, e.g., Bonnette, 704 F.2d at 1470 (considering whether
the potential joint employer has ``the power to hire and fire''
employees) (emphasis added); Enterprise Rent-A-Car, 683 F.3d at 468
(considering authority to control employee and their work);
Baystate, 163 F.3d at 675-76 (citing a potential joint employer's
power to decline to send a worker back to a job site as relevant to
the joint employment determination).
---------------------------------------------------------------------------
The 2020 Rule similarly recognized the relevance of the potential
employer's reserved right to control, but stated that the ``potential
joint employer must actually exercise--directly or indirectly--one or
more of the[ ] indicia of control'' to be a joint employer under the
FLSA.\198\ The 2020 Rule further stated that ``[t]he potential joint
employer's ability, power, or reserved right to act in relation to the
employee may be relevant for determining joint employer status, but
such ability, power, or right alone does not demonstrate joint employer
status without some actual exercise of control.'' \199\ The 2020 Rule
added that ``[s]tandard contractual language reserving a right to act,
for example, is alone insufficient for demonstrating joint employer
status.'' \200\
---------------------------------------------------------------------------
\198\ 29 CFR 791.2(a)(3)(i) (2020) (citing 29 U.S.C. 203(d)).
\199\ 29 CFR 791.2(a)(3)(i) (2020).
\200\ Id.
---------------------------------------------------------------------------
However, the Department is not again proposing that regulatory
text, nor does it maintain that actual exercise of control is necessary
to find joint employment under the FLSA. Having further considered the
matter, the Department believes that the more nuanced position it is
proposing here--not requiring actual exercise of control for there to
be joint employment, but recognizing that exercised control is more
relevant than reserved control which is rarely or never exercised--is
more consistent with the FLSA and longstanding caselaw, which focuses
both on the ``degree'' of control \201\ and on ``the `economic reality'
of the situation.'' \202\ For example, in Bonnette, the court focused
on the actual exercise of control where there was a factual dispute
over reserved right of control, stating that ``[r]egardless of whether
the [counties] are viewed as having the power to hire and fire . . .
[they] exercised considerable control over the nature and structure of
the employment relationship.'' 704 F.2d at 1470 (emphasis added).
Similarly, in Salinas v. Commercial Interiors, the Fourth Circuit
determined that a general contractor was a vertical joint employer in
part because, in addition to its other control, it ``could--and did''
impose requirements on how the workers performed the work. 848 F.3d at
146 (emphasis added); cf. Bartels v. Birmingham, 332 U.S. 126, 128-32
(1947) (applying an ``economic reality'' test under the original Social
Security Act and declining to find that a dance hall jointly employed a
group of musicians (along with their band leader), despite an
unexercised contract clause that gave the dance hall ``complete
control'' over the musicians).
---------------------------------------------------------------------------
\201\ Layton, 686 F.3d at 1178-79; Torres-Lopez, 111 F.3d at
642-43; see also Zheng, 355 F.3d at 72 (examining the ``degree'' of
supervision).
\202\ Moreau, 343 F.3d at 1188 (emphasis added); see also
Mitchell v. John R. Cowley & Bro., Inc., 292 F.2d 105, 112 (5th Cir.
1961) (emphasizing ``the actual circumstances of employment'' in
determining whether joint employment exists).
---------------------------------------------------------------------------
Moreover, the Department's position in the 2020 Rule that actual
exercise of control is necessary to find joint employment under the
FLSA stemmed in large part from its position that section 3(d)'s
definition of ``employer'' was the sole statutory basis for joint
employment.\203\ In this proposal, however, the Department agrees (as
explained above) that section 3(g)'s definition of ``employ'' is also
relevant to determining joint employment, and considering both actual
control and reserved right to control is consistent with defining
``employ'' as including ``to suffer or permit to work.'' \204\ Section
3(g) indicates that joint employment may exist where the potential
joint employer has substantial power to direct an employee's work, even
if it does not actively direct the work.\205\
---------------------------------------------------------------------------
\203\ See 29 CFR 791.2(a)(3)(i) (2020) (citing 29 U.S.C.
203(d)); see also 84 FR 14044 (``Requiring the actual exercise of
power ensures that the four-factor test is consistent with the
provision of 3(d) that determines joint employer status, which
requires an employer to be `acting . . . in relation to an
employee.' '') (quoting 29 U.S.C. 203(d)). In addition, the Seventh
Circuit has advised in an FMLA case that, for joint employment to
exist, ``each alleged employer must exercise control over the
working conditions of the employee, although the ultimate
determination will vary depending on the specific facts of each
case.'' Moldenhauer, 536 F.3d at 644 (citing Remington Hybrid Seed,
495 F.3d at 408).
\204\ 29 U.S.C. 203(g).
\205\ See Sec'y of Lab., U.S. Dep't of Lab. v. Lauritzen, 835
F.2d 1529, 1543 (7th Cir. 1987) (Easterbrook, J., concurring)
(explaining that the ``suffer or permit'' phrasing potentially
``sweeps in'' any work ``done for the employer's benefit or with the
employer's acquiescence''). The Eleventh Circuit has noted that
courts have found employment relationships ``under a multitude of
circumstances where the alleged employer exercised little or no
[actual] control or supervision over the putative employees.''
Antenor, 88 F.3d at 933 n.10.
---------------------------------------------------------------------------
[[Page 21894]]
Taking into consideration this caselaw and all the FLSA's
employment definitions, the Department believes that proposed Sec.
791.115(c) will provide greater clarity on the respective roles that
actual practice and contractual provisions play in determining the
economic reality of potential joint employment.
The Department welcomes comments on all aspects of proposed Sec.
791.115(c).
4. Indirect Control (Proposed Sec. 791.115(d))
Proposed Sec. 791.115(d) recognizes that indirect control may be
considered when applying the four factors identified in proposed Sec.
791.115(a). The former provides that indirect control is exercised by
the potential joint employer through mandatory directions to another
employer that controls the employee but adds that the other employer's
voluntary decision to grant the potential joint employer's request,
recommendation, or suggestion does not constitute indirect control that
can demonstrate joint employer status. In addition, proposed Sec.
791.115(d) also clarifies that acts which incidentally impact the
employee also do not indicate joint employer status. The 2020 Rule
contained the same provision.\206\
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\206\ 29 CFR 791.2(a)(3)(ii) (2020).
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A potential joint employer may exercise indirect control by
directing an intermediary employer to hire or fire an employee, set an
employee's schedule, or determine an employee's pay, or otherwise
effectuating these actions through the intermediary employer. Thus,
indirect control is control that flows from the potential joint
employer through the intermediary employer to the employee. If the
potential joint employer directs the intermediary employer's exercise
of control over the employee, indirect control of the employee exists.
But agreeing to a mere request or recommendation, alone, is not enough
for indirect control, although it can be indicative in rare
circumstances.
The Third Circuit articulated this distinction in Enterprise Rent-
A-Car, holding that such recommendations are not relevant to joint
employer status. In that case, the parent company lacked the necessary
direct control or authority over a subsidiary's assistant managers for
joint employer status.\207\ The plaintiffs sought to demonstrate joint
employer status on the basis of indirect control by arguing that the
parent company ``functionally held many of these [authority] roles by
way of the guidelines and manuals it promulgated to its subsidiaries.''
\208\ But the Third Circuit found ``no evidence that [the parent
company's] actions at any time amounted to mandatory directions rather
than mere recommendations.'' \209\ Therefore, ``[i]nasmuch as the
adoption of [the parent company's] suggested policies and practices was
entirely discretionary on the part of the subsidiaries, [the parent
company] had no more authority over the conditions of the assistant
managers' employment than would a third-party consultant who made
suggestions for improvements to the subsidiaries' business practices.''
\210\
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\207\ 683 F.3d at 471.
\208\ Id.
\209\ Id. at 470.
\210\ Id.
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The Department continues to believe, as it did when promulgating
the 2020 Rule,\211\ that the Third Circuit's description of indirect
control is correct and sensible. If a parent company lacks authority to
require a subsidiary to adopt certain employment practices, it cannot
indirectly require the subsidiary's employees to adopt such practices.
In sum, a potential joint employer exercises indirect control over an
intermediary employer's employee by issuing ``mandatory directions'' to
the intermediary employer. On the other hand, a potential joint
employer's request, recommendation, or suggestion for an employment
action, even if granted, is rarely evidence of indirect control because
the intermediary employer has discretion to grant or refuse the
request. In rare circumstances, such as when an intermediary employer
repeatedly follows without question a potential joint employer's
requests regarding employees, it may be inferred that the intermediary
employer lacks discretion to refuse those requests, and therefore,
indirect control exists. Proposed Sec. 791.115(d) captures this
distinction, and the illustrative examples in proposed Sec.
791.115(g)(2) and (3) provide additional guidance.
---------------------------------------------------------------------------
\211\ 85 FR 2834-35.
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Additionally, proposed Sec. 791.115(d) clarifies that acts which
incidentally impact the employees of another employer do not indicate
joint employer status. General decisions by a business may impact other
businesses with whom that business contracts or partners (and their
employees), and the Department in the 2020 Rule sought to clarify that
incidental impacts on their employees from these decisions do not
indicate that the business is a joint employer.\212\ For instance, a
shipping facility that cuts back on its staffing needs during a slow
period may incidentally impact the work schedules of its staffing
agency's employees, but that general business decision would fall short
of control over the employees' work schedules that would indicate joint
employer status.\213\ Similarly, the Eleventh Circuit in Layton found
that certain business decisions made by a shipping and logistics
company which incidentally impacted the workdays of drivers employed by
a third party contractor, such as establishing the time that packages
were available for pick-up each morning or relaying ``erratic pick-up
orders'' that required drivers to work longer hours, were insufficient
to indicate joint employment. 686 F.3d at 1178. While acknowledging
that such business decisions ``may have incidentally impacted Drivers'
working conditions,'' the court concluded that such decisions did not
establish joint employment where the company ``did not involve itself
with the specifics of how those goals would be reached'' or otherwise
``exert control as an employer would have.'' Id. The Department
believes that proposed Sec. 791.115(d) would bring helpful clarity to
businesses as they make decisions that could potentially affect their
business partners.
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\212\ Id. at 2835-36.
\213\ Id. at 2835 n.72.
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The Department welcomes comments on all aspects of proposed Sec.
791.115(d).
5. Consideration of Additional Factors (Proposed Sec. 791.115(e))
Proposed Sec. 791.115(e) explains that additional factors beyond
the four factors identified in proposed Sec. 791.115(a) may be
relevant for determining vertical joint employment. Proposed Sec.
791.115(e) provides that, for example, additional indicia of whether
the potential joint employer exercises significant control over the
terms and conditions of the employee's work in addition to the four
factors may be relevant. Proposed Sec. 791.115(e) further provides
that indicia of whether the employee is economically dependent on the
potential joint employer for work may also be relevant. Proposed Sec.
791.115(e) provides two examples of additional factors that may be
considered. First, if the employee has a continuous or repeated
relationship with the potential joint employer in that the potential
joint employer continuously or repeatedly benefits from the employee's
work whether or not the other employers involved change, that may
indicate joint
[[Page 21895]]
employment. Second, if the employee works at a location or facility
that is owned or controlled by the potential joint employer that
benefits from the employee's work, that may indicate joint employment.
Of course, if there is no continued or repeated relationship and the
employee does not work at a location or facility that is owned or
controlled by the potential joint employer, those facts would indicate
no joint employment if they are considered. Proposed Sec. 791.115(e)
cautions, however, that any additional factors are generally less
relevant than the four factors identified in proposed Sec. 791.115(a),
which typically carry greater weight in the analysis than any
additional factors. Proposed Sec. 791.115(e) adds that if the four
factors identified in proposed Sec. 791.115(a) unanimously indicate
joint employment or no joint employment, there is a substantial
likelihood that the indicated outcome is correct, and additional
factors are highly unlikely, either individually or collectively, to
outweigh the combined probative value of those four factors. This
provides application clarity to workers, employers, and the
Department's investigators alike--either demonstrating joint employer
status or its absence--that is very likely to broadly align with the
wide variety of tests, standards, and analyses applied by the federal
circuit courts.
It is well-settled that factors in multi-factor tests for
determining FLSA joint employment are not exhaustive and that
additional factors may be considered where material and
appropriate.\214\ The 2020 Rule allowed for the consideration of
additional factors, ``but only if they are indicia of whether the
potential joint employer exercises significant control over the terms
and conditions of the employee's work.'' \215\ The Department is not
proposing to adopt this provision from the 2020 Rule. Although limiting
the consideration of additional factors to those that relate to control
is supported by the Third Circuit,\216\ the Department, having
considered the issue further for purposes of this proposal, recognizes
that courts, including Bonnette, generally do not place such limits on
the consideration of additional factors.\217\ The Department further
recognizes that the district court in Scalia ruled that the 2020 Rule's
provision regarding the consideration of additional factors, in its
view, ``unlawfully limits the factors the Department will consider in
the joint employer inquiry.'' \218\ Accordingly, this proposal does not
limit the consideration of additional factors beyond the four factors
identified in Sec. 791.115(a) to those that relate to control, but
recognizes that such factors are likely to be relevant where the four
factors point to different conclusions.
---------------------------------------------------------------------------
\214\ See, e.g., 85 FR 2836 (``Courts that apply multi-factor
balancing tests leave open the possibility of considering other
factors.'') (citing cases); Bonnette, 704 F.2d at 1470 (``The
ultimate determination must be based `upon the circumstances of the
whole activity.' '') (quoting Rutherford Food, 331 U.S. at 730);
Zheng, 355 F.3d at 71-72 (explaining that a joint employment
``determination is to be based on `the circumstances of the whole
activity,' '' and informing the district court that, on remand, it
is ``free to consider any other factors it deems relevant to its
assessment of the economic realities'') (quoting Rutherford Food,
331 U.S. at 730); Torres-Lopez, 111 F.3d at 639 (``A court should
consider all those factors which are relevant to the particular
situation in evaluating the economic reality of an alleged joint
employment relationship under the FLSA.'') (brackets and internal
quotation marks omitted) (citing Bonnette, 704 F.2d at 1470).
\215\ 29 CFR 791.2(b) (2020). The 2020 Rule stated that,
``[b]ecause evaluating control of the employment relationship by the
potential joint employer over the employee is the purpose of the
Department's four-factor balancing test, it is sensible to limit the
consideration of additional factors to those that indicate
control.'' 85 FR 2836.
\216\ Enterprise Rent-A-Car, 683 F.3d at 469-470 (stating that
its enumerated ``factors do not constitute an exhaustive list of all
potentially relevant facts'' and that ``other indicia of
`significant control' '' beyond the enumerated factors may be
relevant to determining joint employer status under the FLSA)
(emphasis in original).
\217\ See supra fn. 214.
\218\ 490 F. Supp. 3d at 790.
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Moreover, the Department is not proposing to exclude from the
analysis any factors solely because they may assess or relate to
economic dependence on an employer for work. The 2020 Rule excluded
consideration of factors relating to the employee's economic dependence
on the potential joint employer.\219\ The Department's exclusion of
economic dependence factors from the analysis in the 2020 Rule was
predicated on its effort to bring analytical clarity by distinguishing
between the analysis for determining a worker's status as an employee
or not under the FLSA and the analysis for determining whether a worker
who has already been determined to be an employee of an employer has a
joint employer. The 2020 Rule advised that the analysis to determine a
worker's status as an employee or not is based on sections 3(e) and
3(g) and assesses economic dependence, and that the analysis for
determining joint employment is based on section 3(d) and does not
assess economic dependence.\220\ However, as explained above, the
Department in this proposal recognizes that these FLSA definitions
should be viewed together and that none of them should be excluded when
considering joint employment. Moreover, the Department, having
considered the issue further, recognizes that some courts consider
economic dependence on an employer for work when determining joint
employment under the FLSA,\221\ and the Department notes that the
district court in Scalia ruled that the 2020 Rule's provision excluding
consideration of economic dependence, in its view, ``contradict[ed]
caselaw and the Department's [prior] views.'' \222\
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\219\ 29 CFR 791.2(c) (2020) (``[T]o determine joint employer
status, no factors should be used to assess economic dependence.'').
\220\ 85 FR 2838; see also id. at 2821 (explaining that
``[e]conomic dependence is relevant when applying section 3(g) and
determining whether a worker is an employee under the [FLSA],'' but
``determining whether a worker who is an employee under the [FLSA]
has a joint employer for his or her work is a different analysis
that is based on section 3(d)'').
\221\ See Layton, 686 F.3d at 1177-78 (citing Antenor, 88 F.3d
at 932-33); Baystate, 163 F.3d at 675. But see Salinas, 848 F.3d at
138 (criticizing courts that rely on an economic realities/economic
dependence approach to determine joint employment because that
approach ``reflects a failure to distinguish the joint employment
inquiry from the separate, employee-independent contractor
inquiry,'' and adding that Rutherford Food does not support ``the
use of economic dependence to guide the entire joint employment
analysis'').
\222\ 490 F. Supp. 3d at 790-91.
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Thus, factors assessing economic dependence on a putative joint
employer for work may be considered as additional factors where
material and appropriate. However, the Department proposes to clarify
that economic dependence on work is not the ``ultimate question'' or
``ultimate test'' of the joint employer analysis, as stated by the
Department's current MSPA regulation and some courts.\223\ Economic
dependence on the employer for work is the ultimate inquiry when
determining whether a particular worker is an employee or an
independent contractor,\224\ but it has less relevance in determining
whether multiple businesses jointly employ the same economically
dependent
[[Page 21896]]
workers.\225\ As the Second Circuit explained, economic dependence
factors, particularly ``the workers' investment in the business, and
the degree of skill and independent initiative'' are ``used primarily
to distinguish independent contractors from employees,'' and ``they do
not bear directly on whether workers who are already employed by a
primary employer are also employed by a second employer. Instead, they
help courts determine if particular workers are independent of all
employers.'' \226\
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\223\ See 29 CFR 500.20(h)(5)(iii); Torres-Lopez, 111 F.3d at
648; see also Antenor, 88 F.3d at 932-33 (asserting that economic
dependence is the ``ultimate notion'' and ``dominant factor'' in
FLSA joint employer cases).
\224\ See Employee or Independent Contractor Status Under the
Fair Labor Standards Act, Family and Medical Leave Act, and Migrant
and Seasonal Agricultural Worker Protection Act, 91 FR 9932, 9973
(proposed Sec. 795.105(b)) (Feb. 27, 2026). Notably, when the
Eleventh Circuit identified economic dependence as the ``ultimate
notion'' and ``dominant factor'' in FLSA joint employment cases in
Antenor, 88 F.3d at 932-33, the court quoted directly from Usery v.
Pilgrim Equipment Co., Inc., 527 F.2d 1308, 1311 (5th Cir. 1975), a
case addressing whether a worker was an employee or independent
contractor and that did not involving joint employment.
\225\ See Salinas, 848 F.3d at 137-39 (criticizing courts which
``incorrectly frame the joint employment inquiry as a question of an
employee's `economic dependence' on a putative joint employer'').
\226\ Zheng, 355 F.3d at 67.
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For example, particular workers may perform unskilled work with
little or no personal investment and little or no opportunity for
profit or loss; such facts might establish that the workers are
economically dependent employees, but they are of no value in
determining whether such workers are jointly employed by a particular
entity. While there are some factors germane to economic dependence
which are ``not limited to the employee/independent contractor
distinction,'' \227\ factors which are so limited should not be
considered in the joint employer analysis, as explained infra in
section III.D.6. of this NPRM.
---------------------------------------------------------------------------
\227\ Aimable, 20 F.3d at 444.
---------------------------------------------------------------------------
More fundamentally, as the Seventh Circuit (Easterbrook, J.)
observed in Remington Hybrid Seed, economic dependence is ``scarcely .
. . helpful'' in assessing joint employer disputes on its own, as some
degree of economic dependency on the clients or business partners of an
employer is ``true of all labor.'' \228\ For example, any employee of a
subcontractor or franchisee could be characterized as economically
dependent in some sense on the general contractor or franchisor
affiliated with his or her subcontractor/franchisee employer, but
neither courts nor the Department have applied the FLSA to extend joint
employer status to all general contractors and franchisors. See Zheng,
355 F.3d at 76 (explaining that judicial precedent interpreting joint
employer status under the FLSA is ``manifestly not intended to bring
normal, strategically-oriented contracting schemes within the ambit of
the [FLSA]''); see also infra section III.F.1. Although the Department
is not proposing categorically to reject the relevance of economic
dependence on the potential joint employer for work as it did in the
2020 Rule, additional factors indicative of economic dependence are
less relevant than the four factors identified in proposed Sec.
791.115(a), often may not be material to the analysis or question, and
need not be considered in every case.
---------------------------------------------------------------------------
\228\ 495 F.3d at 407.
---------------------------------------------------------------------------
The Department posits that providing in the proposed regulatory
text two examples of additional factors that may be considered--whether
the employee has a continuous or repeated relationship with the
potential joint employer and whether the employee works at a location
or facility that is owned or controlled by the potential joint
employer--would both be useful guidance and enjoys broad support across
several circuit courts.\229\ As with the four factors proposed for
consideration in every case, these additional factors can operate in
either direction, i.e., indicating the presence or absence of a
vertical joint employment relationship, depending on the facts. Compare
Salinas, 848 F.3d at 147 (finding joint employment in part because
workers for the subcontractor at issue ``worked almost exclusively on
Commercial jobsites''), with Moreau, 356 F.3d at 948 (finding no joint
employment in part because the subcontractor at issue ``did not service
Air France exclusively, and its employees would rotate from plane to
plane and carrier to carrier so as to fill up an entire
workday'').\230\
---------------------------------------------------------------------------
\229\ For example, the Second Circuit considers, among other
factors, whether the employee uses the potential joint employer's
premises and equipment for the work and whether the employee works
exclusively or predominantly for the potential joint employer. See
Barfield, 537 F.3d at 143 (citing Zheng, 355 F.3d at 72). The
Eleventh Circuit considers whether the potential joint employer owns
``the facilities where the work occurred.'' Layton, 686 F.3d at
1176-77. See also Rutherford Food, 331 U.S. at 730 (noting that the
employees worked continuously for the slaughterhouse (they did not
``shift as a unit from one slaughter-house to another) and used the
slaughterhouse's ``premises and equipment'' for the work); but see
Layton, 686 F.3d at 1176 (rejecting consideration of the
``permanency and exclusivity of employment'').
\230\ The Department notes that the 2020 Rule included a
provision advising that a potential joint employer's ``allowing [an]
employer to operate a business on its premises (including `store
within a store' arrangements)'' did not make joint employer status
more or less likely under the FLSA. 29 CFR 791.2(d)(5) (2020). As
discussed below in section III.F., the Department is not proposing
to readopt that provision in this NPRM.
---------------------------------------------------------------------------
Finally, as explained above, while additional factors may be
considered where material and appropriate under the circumstances, in
the Department's experience, additional factors often will not be
either material to the question of joint employment or need to be
considered. This is because the four factors identified in Sec.
791.115(a) frequently clearly indicate a particular outcome, any
relevant additional facts may and will be considered under one or more
of those four factors, or both. Therefore, it is important to note
that, unlike some tests that, in practice, allow for a determination to
be made based on strong showing of a few of many factors, the four
factors identified in Sec. 791.115(a) must be considered in every
case, and consideration of additional factors will depend on the
circumstances of the case. See Enterprise Rent-A-Car, 683 F.3d at 469
(advising that the four Bonnette factors ``reflect the facts that will
generally be most relevant in a joint employment context'' and
``generally serve as the starting point'' for a vertical joint
employment analysis). For these reasons, proposed Sec. 791.115(e)
provides that the four factors identified in Sec. 791.115(a) generally
are more relevant and carry greater weight in the analysis than any
additional factors. And even where additional factors may appear
generally relevant to a particular situation, they are highly unlikely
to outweigh the combined probative value of those four factors when
they unanimously point to one reliable outcome measured against the
wide variety of judicial tests. These provisions would provide useful
guidance on how to apply the factors and help to ensure that any
consideration of additional factors does not overtake consideration of
the four factors.
The Department welcomes comments on all aspects of proposed Sec.
791.115(e) and the consideration of additional factors.
6. Factors That Are Not Relevant (Proposed Sec. 791.115(f))
Proposed Sec. 791.115(f) provides that, notwithstanding any
foregoing provisions of the proposed regulatory text, the following
factors are primarily probative of a worker's status as an employee or
independent contractor and have no relevance in determining joint
employer status: (1) whether the employee is in a job that requires
special skill, initiative, judgment, or foresight; (2) whether the
employee has the opportunity for profit or loss based on his or her
managerial skill; and (3) whether the employee invests in equipment or
materials required for work or the employment of helpers.
Although the Department is not proposing to exclude economic
dependence on an employer for work from determining joint employer
status, the Department believes that certain factors are indisputably
probative of economic dependence in the context of determining whether
a worker is an employee or independent contractor--
[[Page 21897]]
not whether an employee has more than one employer operating jointly
vis [agrave] vis him or her. The Department is not aware of any basis
for stating that, as a matter of reality, skilled workers are more or
less likely than unskilled workers to have a joint employer. Moreover,
concepts like opportunity for profit or loss, investments, and
initiative strike at the core of the analysis for determining employee
or independent contractor status under the FLSA.\231\ Indeed, in a
joint employment case, the First Circuit in Baystate rejected factors
that some courts applied ``for the purpose of determining whether a
worker is an `employee' or an ``independent contractor,''' such as the
employee's skill and initiative, opportunity for profit or loss, and
investments.\232\ The First Circuit explained that the ``usefulness of
[these factors] is significantly limited in this case, however, because
the employee/independent contractor choice is no longer before us.''
\233\ Similarly, the Eleventh Circuit agreed in Layton that the
employee's opportunity for profit and loss and the degree of skill
required to perform the job were not relevant when determining joint
employment.\234\ The court explained that such ``factors only
distinguished whether one was an employee or an independent
contractor.'' \235\ Discussing its prior decision in Aimable, the court
further explained that ``[b]ecause it had been determined [in that
case] that the farm workers were employees of the contractor, there was
no need to evaluate whether hallmarks of an independent-contractor
relationship existed.'' \236\ Although the Ninth Circuit, for example,
considers in its joint employment analysis the three factors identified
in proposed Sec. 791.115(f),\237\ in line with the First and Eleventh
Circuits, the Department believes that they should not be considered
for the reasons explained above.
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\231\ See 91 FR 9973-74 (proposed Sec. 795.105(d)(1)(ii))
(describing the worker's opportunity for profit or loss based on his
or her exercise of initiative (such as managerial skill or business
acumen or judgment) or management of his or her investments or
capital expenditures as a core factor in the independent contractor
analysis).
\232\ 163 F.3d at 675 n.9.
\233\ Id.
\234\ 686 F.3d at 1176 (citing Aimable, 20 F.3d at 443-44). As
noted in fn. 229 above, Layton also rejected as irrelevant
consideration of the ``permanency and exclusivity of employment.''
\235\ 686 F.3d at 1176 (citing Aimable, 20 F.3d at 443-44).
\236\ Id.
\237\ Torres-Lopez, 111 F.3d at 639-640.
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The 2020 Rule provided that the three factors identified in
proposed Sec. 791.115(f) were not relevant to determining joint
employer status because they relate to economic dependence on a
putative joint employer for work, which the 2020 Rule generally
excluded from consideration.\238\ Although this NPRM likewise considers
the three factors to be irrelevant, it does so for different reasons,
as explained above. The 2020 Rule also provided that whether the
employee ``is in a specialty job'' was irrelevant because that factor
assessed economic dependence; the question is whether the individual is
employed by one or more employers.\239\ To be clear, however, the
Department is not including that language from the 2020 Rule in this
NPRM. As explained above, the Department's proposed analysis does not
exclude consideration of economic dependence on an employer for work.
In addition, the Department recognizes that a number of courts consider
whether the employee performs a specialty job in their joint employment
analyses.\240\
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\238\ 29 CFR 791.2(c)(1)-(3) (2020); see also 85 FR 2837-38.
\239\ 29 CFR 791.2(c)(1) (2020); see also 85 FR 2837-38.
\240\ See, e.g., Layton, 686 F.3d at 1176 (considering, among
other factors, whether the employees perform ``a specialty job
integral to the business''); Remington Hybrid Seed, 495 F.3d at 408
(concluding that a corn grower jointly employed workers hired to
provide detasseling and rogueing services in part because
``detasseling is a specialty job in an agricultural operation'');
Zheng, 355 F.3d at 72-74 (considering ``the extent to which
[workers] performed a discrete line-job that was integral to [the
joint employer's] process of production,'' informed by ``industry
custom and historical practice''); Torres-Lopez, 111 F.3d at 639-40
(considering, among other factors, ``whether the work was a
`specialty job on the production line''') (quoting Rutherford Food,
331 U.S. at 730). The district court in Scalia noted that the 2020
Rule rejected ``considering `whether the employee is in a specialty
job' in the joint employer inquiry,'' but stated that the rejection
contradicted Supreme Court precedent because Rutherford Food ``held
that it was relevant that the workers `did a specialty job on the
production line.''' 490 F. Supp. 3d at 791 (citing 331 U.S. at 730)
(emphasis in original). The Department additionally notes that
consideration of whether the work is ``integral'' is a departure
from the Supreme Court's consideration in Rutherford Food of whether
work was ``part of the integrated unit of production.'' 331 U.S. at
729; see also 91 FR 9956 (discussing this consideration in the
context of determining employee or independent contractor status
under the FLSA).
---------------------------------------------------------------------------
Finally, the Department is not proposing to identify as an
irrelevant factor the number of contractual relationships, other than
with the employer, that the potential joint employer has entered into
to receive similar services. The 2020 Rule included such a provision,
explaining that the factor assesses economic dependence and is not
relevant, like all factors assessing economic dependence.\241\ As
explained above, however, the Department is not proposing in this NPRM
to exclude consideration of any factor simply because it assesses
economic dependence for work, even though the number of contractual
relationships is less likely to be probative of joint employment. The
Department welcomes comments on whether consideration of the number of
contractual relationships, other than with the employer, that the
potential joint employer has entered into to receive similar services
should be expressly excluded or included or not addressed in any final
rule.
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\241\ 29 CFR 791.2(c)(4) (2020); see also 85 FR 2821.
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The Department welcomes comments on all aspects of proposed Sec.
791.115(f).
7. Examples (Proposed Sec. 791.115(g))
Proposed Sec. 791.115(g) includes five examples illustrating and
applying the Department's proposed analysis for vertical joint
employment, generally tracking the factual scenarios addressed in the
examples in Sec. 791.2(g)(3) through (7) of the 2020 Rule.\242\ Each
proposed example provides a hypothetical factual situation, explains
how the vertical joint employment standard applies, and concludes
whether the persons or entities are joint employers. The Department's
conclusions following each example are, like all illustrative examples,
limited to substantially similar factual situations.
---------------------------------------------------------------------------
\242\ See 29 CFR 791.2(g)(3)-(7) (2020).
---------------------------------------------------------------------------
The Department welcomes comments on all aspects of the proposed
examples.
E. Determining Horizontal Joint Employment (Proposed Sec. 791.120)
The Department proposes to readopt as Sec. 791.120 most of the
regulatory text regarding horizontal joint employment from the 2020
Rule. Specifically, the Department proposes to readopt the regulatory
text from Sec. 791.2(e)(2) of the 2020 Rule (except for the last
sentence) as Sec. 791.120(a), the last sentence of the regulatory text
from Sec. 791.2(e)(2) of the 2020 Rule as Sec. 791.120(b), and the
examples regarding horizontal joint employment from Sec. 791.2(g)(1)
and (2) of the 2020 Rule as Sec. 791.120(c). The Department is not
proposing to readopt the regulatory text from Sec. 791.2(e)(1) of the
2020 Rule because that provision merely explained what horizontal joint
employment is and would be repetitive of proposed Sec. 791.110(b). The
Department is proposing non-substantive changes to the regulatory text
that it adopted in the 2020 Rule, such as changing references to the
``Act'' to the ``FLSA'' and changing references to ``second'' joint
employer scenario and ``this'' scenario to ``horizontal'' joint
employer scenario. As noted above,
[[Page 21898]]
while the Department did not use terms such as ``vertical'' or
``horizontal'' joint employment in the 2020 Rule, it is in this
proposal due both to their ubiquity and the clarity they provide.
Proposed Sec. 791.120(a) describes the circumstances in which
there may be horizontal joint employment, explaining how to determine
if the employers are joint employers in this scenario and focusing on
the association or lack thereof between the employers. The proposed
regulatory text explains that, if the employers are acting
independently of each other and are disassociated with respect to the
employment of the employee, each employer may disregard all work
performed by the employee for the other employer in determining its own
responsibilities under the FLSA. The proposed regulatory text further
explains that, if the employers are sufficiently associated with
respect to the employment of the employee, they are joint employers and
must aggregate the hours worked by the employee for each of them for
purposes of determining compliance with the FLSA. As in prior versions
of part 791, the proposed regulatory text provides three situations
where the employers will generally be sufficiently associated: (1)
there is an arrangement between them to share the employee's services;
(2) one employer is acting directly or indirectly in the interest of
the other employer in relation to the employee; or (3) they share
control of the employee, directly or indirectly, by reason of the fact
that one employer controls, is controlled by, or is under common
control with the other employer. The proposed regulatory text advises
that such a determination depends on all of the facts and
circumstances.
Proposed Sec. 791.120(b) explains that business relationships
between two employers that have little to do with their employment of
specific workers, such as sharing a vendor or being franchisees of the
same franchisor, are not generally probative, and could not alone
indicate a sufficient association between the employers to establish
that they are joint employers.
Proposed Sec. 791.120(c) provides two illustrative examples which
imitate the factual scenarios previously adopted in Sec. 791.2(g)(1)
and (2) of the 2020 Rule.\243\ Each example provides a hypothetical
factual situation and discusses how the Department's standard for
determining horizontal joint employment would apply and whether or not
there is joint employment.
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\243\ 29 CFR 791.2(g)(1)-(2) (2020).
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The standard for determining horizontal joint employment reflected
in proposed Sec. 791.120 is longstanding and well-settled. For
example, the Department's pre-2020 version of 29 CFR part 791, which
was adopted in 1958 and derived from the 1939 Interpretative Bulletin
No. 13, explained that, when one employee performs separate work for
two or more employers in the same workweek, the determination of a
joint employment relationship turns on the association or lack thereof
between the two potential joint employers.\244\ The pre-2020 regulation
elaborated on this guidance with three non-exhaustive situations where
there would generally be sufficient association between the employers
and thus horizontal joint employment.\245\
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\244\ 29 CFR 791.2(a) (1958).
\245\ 29 CFR 791.2(b) (1958).
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The 2020 Rule explained that the pre-2020 FLSA regulation provided
``clear and useful'' guidance in the horizontal joint employment
scenario.\246\ The 2020 Rule added that ``focusing on the relationship
between the two employers is the correct approach'' in this scenario,
and that the pre-2020 regulation's ``focus on the relationship between
the two employers has been useful to both the public and courts.''
\247\ For these reasons, the 2020 Rule retained the analysis provided
in the pre-2020 regulation (with non-substantive revisions) as its
standard for determining horizontal joint employment.\248\
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\246\ 85 FR 2851.
\247\ Id. at 2845; see also 84 FR 14052 (citing A-One Med.
Servs., 346 F.3d at 917-18; Murphy v. Heartshare Human Servs. of New
York, 254 F. Supp. 3d 392, 399-404 (E.D.N.Y. 2017); Li v. A Perfect
Day Franchise, Inc., 281 FRD. 373, 400-01 (N.D. Cal. 2012); Chao v.
Barbeque Ventures, LLC, No. 8:06CV676, 2007 WL 5971772, at *6 (D.
Neb. Dec. 12, 2007); WHD Opinion Ltr. FLSA 2005-17NA, 2005 WL
6219105 (June 14, 2005) (applying 1958 regulation to determine that
separate health care facilities were joint employers and employees'
hours worked for different facilities must be aggregated in a
workweek to calculate whether overtime pay is due); WHD Opinion
Ltr., 1998 WL 1147714 (Jul. 13, 1998) (applying 1958 regulation to
determine that separate health care entities were joint employers
and employees' hours worked for different entities must be
aggregated in a workweek for purposes of calculating any overtime
pay due under the FLSA).
\248\ 85 FR 2844-45. The district court decision that vacated
the 2020 Rule's vertical joint employer standard severed the
horizontal joint employer standard and did not vacate it. Scalia,
490 F. Supp. 3d at 795-96 (agreeing that the 2020 Rule ``makes only
`non-substantive revisions' to existing law for horizontal joint
employer liability'') (quoting 85 FR 2844).
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The Department's subsequent Rescission Rule agreed that the 2020
Rule's horizontal joint employment standard ``reflected the
Department's historical approach to the issue, and was consistent with
the relevant case law.'' \249\ The Rescission Rule rescinded the 2020
Rule in its entirety because it would have been ``difficult and
impractical'' to leave the horizontal joint employer provision standing
alone.\250\ However, the Department emphasized that it was not
reconsidering the substance of that standard and that the ``focus of a
horizontal joint employment analysis will continue to be the degree of
association between the potential joint employers, as it was in the
[2020] Rule and the prior version of part 791.'' \251\
---------------------------------------------------------------------------
\249\ 86 FR 40954.
\250\ Id.
\251\ Id.
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In 2025, WHD again applied its historical approach to the
horizontal joint employment scenario, analyzing in Opinion Letter
FLSA2025-5 whether a restaurant and a members club for whom an employee
worked separate hours are sufficiently associated with each other with
respect to the employee such that they jointly employ the
employee.\252\ Noting that ``[h]orizontal joint employment typically
occurs when employers are sufficiently associated with respect to the
employment of the particular employee(s),'' WHD concluded that there
were sufficient facts to demonstrate a horizontal joint-employer
relationship between the restaurant and members club.
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\252\ See <a href="https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA-2025-05.pdf">https://www.dol.gov/sites/dolgov/files/WHD/opinion-letters/FLSA/FLSA-2025-05.pdf</a>.
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The Department is not aware of any basis for changing its
longstanding approach to horizontal joint employment and accordingly
proposes to readopt the standard from the 2020 Rule as explained above.
The Department welcomes comments on all aspects of its proposed
horizontal joint employment standard.
F. Relevance of Certain Business Practices (Proposed Sec. 791.125)
Like other agencies enforcing labor or antidiscrimination laws, WHD
looks beyond titles and labels to the particular facts and practices
when administering the Act and other statutes for which it is
responsible. As such, the Department proposes to clarify that certain
general common business models and business practices, standing alone,
do not categorically or in the abstract make joint employer status more
or less likely under the FLSA, FMLA, or MSPA. Specifically, the
Department proposes to largely readopt the guidance from the
Department's 2020 Rule at Sec. 791.2(d)(2)-(5), with one revision
(described below) and one omission: the Department does not propose to
readopt the guidance that ``allowing [another] employer to operate
[[Page 21899]]
on its premises (including `store within store' arrangements)'' does
not make joint employer status more or less likely under the FLSA.
Notably, the Department is proposing to locate guidance about the
relevance of certain business models and business practices in a
standalone section in part 791, which would make clear that such
guidance is applicable in the contexts of both horizontal joint
employment as well as vertical joint employment while also underscoring
that such guidance would be independent and severable from other parts
of the rule, including the analyses proposed to determine joint
employer status in Sec. 791.115 and Sec. 791.120.
In the Department's view, general provisions relating to health,
safety or legal compliance, quality control requirements, and common
support practices do not establish or indicate the existence of joint
employment. The mere existence of such business practices does not
speak to whether a party is ``acting directly or indirectly in the
interest of [another] employer in relation to an employee,'' 29 U.S.C.
203(d), or ``suffer[ing] or permit[ting]'' work from the employees of
another employer, 29 U.S.C. 203(g). Instead, as explained above, joint
employer status turns on ```the circumstances of the whole activity,'''
with factors germane to the wages and working conditions of the
employees at issue guiding the inquiry. Bonnette, 704 F.2d at 1469-70.
Moreover, promulgating such guidance in the Code of Federal
Regulations would allow parties to maintain certain basic--often best--
business practices with greater clarity and confidence that such
responsible behavior will not transform them into a joint
employer.\253\ The Department notes that many of these identified
business practices--such as basic anti-harassment policies, workplace
safety measures, providing association health plans, sponsoring
apprenticeship programs, etc.--are beneficial to all parties, including
workers and consumers.
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\253\ The Portal-to-Portal Act of 1947 provides parties with a
defense against FLSA liability for any acts or omissions made in
good faith reliance ``on any written administrative regulation,
order, ruling, approval, or interpretation'' issued by the
Administrator of the Wage and Hour Division. See 29 U.S.C. 259; see
also 29 CFR 790.13-.19 (elaborating on the requirements for a ``good
faith reliance'' defense under the Portal-to-Portal Act). This
reliance defense is not available for alleged FMLA or MSPA
violations. Separately, the Department's FMLA and MSPA regulations
are legislative rules which carry the ```force and effect of law.'''
Perez v. Mortgage Bankers Ass'n, 575 U.S. 92, 96 (2015). Congress
has afforded the Department broad rulemaking authority under the
FMLA and MSPA. See 29 U.S.C. 2654; 29 U.S.C. 1861.
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1. Franchising, Brand-and-Supply Agreements, and Similar Business
Models
In Sec. 791.125(a), the Department proposes to reaffirm that
merely operating as a franchisor, entering into a brand and supply
agreement, or using a similar business model does not, by itself, make
joint employer status more or less likely. The Department notes that
this proposed guidance is not a categorical statement that franchisors
and similar businesses ``can never qualify'' as joint employers; \254\
but it would make clear that merely operating as a franchisor or
pursuing a similar business model has no categorical impact--positive
or negative--in determining whether the business is a joint employer.
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\254\ Orozco v. Plackis, 757 F.3d 445, 452 (5th Cir. 2014); see
also Olvera v. Bareburger Grp. LLC, 73 F. Supp. 3d 201, 208
(S.D.N.Y. 2014) (denying a franchisor's motion to dismiss in an FLSA
lawsuit where ``plaintiffs . . . have not merely stated, in a
conclusory fashion, that the franchisor defendants were joint
employers . . . [but] have alleged several facts that, if true,
would satisfy the `economic reality' test for establishing employer
status'').
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In a franchising relationship, one party--the franchisor--grants a
license to other parties--franchisees--to use the franchisor's brand
name and operational model in selling the franchisor's products or
services. The franchisor typically ``provides the franchisee with
franchising leadership and support and exercises some controls to
ensure the franchisee's adherence to brand guidelines,'' while each
franchisee ``is responsible for the day-to-day management of its
independently owned business and benefits or risks loss based on [its]
own performance and capabilities.'' \255\ Similarly, in a brand and
supply agreement, ``one business agrees to sell another business'
products under that business' brand name and comply with certain brand
standards and signage requirements,'' though ``without agreeing to
limitations or requirements for other products or services offered.''
\256\
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\255\ International Franchise Association, ``What is a
Franchise?'', <a href="https://www.franchise.org/franchising-overview/what-is-a-franchise">https://www.franchise.org/franchising-overview/what-is-a-franchise</a>.
\256\ 85 FR 2840.
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The Department recognizes that franchising and brand-and-supply
agreements are common and legitimate business models, and that such
arrangements do not in and of themselves result in joint employment
under the FLSA. In particular, the Department emphasizes that its
proposed vertical joint employment analysis is not intended to make
franchisors or businesses in any similar business model more or less
likely to be joint employers than other types of businesses; instead,
it is intended to provide a general analysis--the application of which
does not take into account franchising or any similar business model.
Under the proposed rule, whether a franchisor or any similar business
is a joint employer would depend on application of the factors proposed
herein to the facts of the business' relationship with the employees.
This is consistent with the approach that courts currently take in that
they apply their varied economic realities analyses to the facts before
them, almost always rejecting arguments that franchisors are joint
employers unless there is sufficient supporting evidence above and
beyond the franchise relationship that the franchisor is involved in
the day-to-day management of the franchisee and its employees.\257\
This guidance is also consistent with the Department's ``longstanding
position that certain business models--such as the franchise model--do
not themselves indicate joint employer status under the FLSA.'' \258\
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\257\ See Orozco, 757 F.3d at 452 (``We do not suggest that
franchisors can never qualify as the FLSA employer for a
franchisee's employees; rather, we hold that [the employee] failed
to produce legally sufficient evidence to satisfy the economic
reality test and thus failed to prove that [the franchisor] was his
employer under the FLSA.''); see also Chen v. Domino's Pizza, Inc.,
No. 09-107 (JAP), 2009 WL 3379946 (D.N.J. Oct. 16, 2009) (holding
that a ``conclusory statement'' does not establish that Domino's
Pizza jointly employs the employees of its franchisees under the
FLSA); Singh v. 7-Eleven, Inc., No. C-05-04534 (RMW), 2007 WL
715488, at *3 (N.D. Cal. Mar. 8, 2007) (franchisor's brand standards
and business model did not make it a joint employer); Ochoa v.
McDonalds Corp., 133 F. Supp. 3d 1228, 1235 (N.D. Cal. 2015) (same);
Gessele v. Jack in the Box, Inc., No. 3:14-CV-1092-BR, 2016 WL
7223324, at *11 (D. Or. Dec. 13, 2016) (holding that franchisor was
not joint employer based on facts that the court found were similar
to the facts in Singh); In re Jimmy John's Overtime Litig., No. 14 C
5509, 2018 WL 3231273, at *20 (N.D. Ill. Jun. 14, 2018) (``Jimmy
John's' control over the systems, operations, and dress code at
franchise stores, as pervasive as it may seem, does not amount to
joint employment.'').
\258\ 85 FR 2823. Moreover, the Department's enforcement
practice has been that when the Department ``investigates a typical
franchisee for potential FLSA violations, the Department does not
seek recovery from the franchisor as a joint employer simply because
it has a franchise arrangement.'' 84 FR 14047.
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Reaffirming this guidance could prevent an overly broad application
of the FLSA that would presumptively render franchisors and similar
entities as joint employers simply by virtue of that characterization,
regardless of the particulars of the relationship between them. At the
same time, the Department recognized in the 2020 Rule that it would be
inappropriate to state that
[[Page 21900]]
there is no business model that could make joint employment more
likely. See 85 FR 2841. Accordingly, the Department clarified in that
rule that ``the franchise business model, the brand and supply business
model, and other similar business models'' do not automatically ``make
joint employer status more likely, while still allowing for the
possibility that business models could be devised that, unlike these
models, would . . . make joint employer status more likely.'' Id.
(emphasis added).
The Department welcomes comments on its readoption of this
provision from the 2020 Rule, including feedback on other businesses
models that commenters believe may or may not be indicative of joint
employment.
2. Compliance With Legal Obligations or Health and Safety Standards
Similar to the 2020 Rule, the Department proposes in Sec.
791.125(b) that contractual provisions addressing and requiring
compliance with general legal obligations or health and safety
standards--and the monitoring of such provisions--do not make joint
employer status more or less likely. Examples of such provisions
include mandating compliance with the FLSA and similar laws, requiring
policies against unlawful harassment, requiring background checks, and
requiring the establishment of workplace safety practices and protocols
or the provision of training regarding matters such as health, safety,
or legal compliance. Businesses regularly insist on such provisions
with their business partners to reduce risk and ensure compliance with
statutory or regulatory requirements.
Courts have held that this type of oversight reflects responsible
contracting, not employer-like control. For example, in Moreau, the
Ninth Circuit held that an airline was not a joint employer merely
because it insisted that a ground-handling contractor comply with
``various safety and security regulations, such as ensuring that food
equipment was properly stowed or that the plane's load was adequately
balanced,'' which the court found to be ``qualitatively different''
than the kind of control which might be indicative of joint employer
status. 356 F.3d at 951. Speaking to the commonality of such practices,
the court noted that ``[a]ny airline . . . concerned about its
passengers' safety would be remiss to simply delegate a task to another
party and not double-check to verify that the task was done properly.''
Id. Similarly, in Zhao v. Bebe Stores, Inc., the court dismissed the
relevance of a retailer's attempts to monitor its garment supplier's
``compliance with labor laws,'' such as its ability to access the
supplier's payroll records, because there was ``no authority'' to
suggest that such monitoring ``can or should be used to find the
existence of a joint employment arrangement.'' 247 F. Supp. 2d 1154,
1161 (C.D. Cal. 2003). Many other courts have similarly dismissed the
relevance of actions taken to ensure compliance with legal or safety
requirements.\259\
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\259\ See, e.g., Godlewska v. HDA, 916 F. Supp. 2d 246, 259-60
(E.D.N.Y. 2013), aff'd sub nom. Godlewska v. Human Dev. Ass'n, 561
F. App'x 108 (2d Cir. 2014) (contrasting ``quality control[ ] . . .
to ensure compliance with the law or protect clients' safety'' with
``control over the employee's `day-to-day conditions of employment'
[that] is relevant to the joint employment inquiry''); Zampos v. W &
E Commc'ns, Inc., 970 F. Supp. 2d 794, 803 (N.D. Ill. 2013)
(requiring installation contractors to subject applicants to
background checks and drug tests does not implicate ``hiring and
firing'' factor because ``this purported control, relating to the
safety and security of Comcast customers, is qualitatively different
from the control exercised by an employer''); Johnson v. Serenity
Transp., Inc., No. 15-CV-02004-JSC, 2017 WL 1365112, at *10 (N.D.
Cal. Apr. 14, 2017) (``Maintaining records for purposes of ensuring
regulatory compliance or monitoring safety does not constitute
maintenance of employment records to satisfy this Bonnette
factor.''); cf. Senne v. Kansas City Royals Baseball Corp., 591 F.
Supp. 3d 453, 515 (N.D. Cal. 2022) (concluding that Major League
Baseball jointly employed minor league baseball players because the
facts established that Major League Baseball was ``not merely a
regulatory body'').
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Courts have recognized there are compelling policy reasons for
discounting the relevance of contractual requirements relating
generally to health, safety, and legal compliance. In Zhao, for
example, the court noted that holding a retailer's attempts to ensure
that its suppliers were complying with the law to be evidence of joint
employer status ``would be counterproductive and would create a
disincentive for clothing designers and manufacturers to monitor
contractor shops to ensure compliance with the FLSA.'' 247 F. Supp. 2d
at 1161. The Department does not want any perceived possibility of
joint employer liability to deter business from taking steps to ensure
legal compliance and protect the health and safety of workers,
customers, and other members of the public.
At the same time, not every contractual provision between
businesses necessarily relates to ``legal obligations''--that is,
obligations imposed by government through law or regulation--and the
Department wishes to avoid such an overly broad misinterpretation of
its language in proposed Sec. 791.125(b). Accordingly, the Department
has made a small revision to the language that it previously adopted in
the 2020 Rule by using the word ``general'' rather than ``specific'' in
the phrase ``requiring the employer to comply with general legal
obligations.'' \260\ The Department welcomes feedback on proposed Sec.
791.125(b).
---------------------------------------------------------------------------
\260\ Cf. 29 CFR 791.2(d)(3) (2020) (addressing contractual
provisions ``requiring the employer to comply with specific legal
obligations'') (emphasis added).
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3. Quality Control and Brand Reputation Standards
The Department proposes to readopt in Sec. 791.125(c) regulatory
text providing that requiring, monitoring, or enforcing another
business' adherence to quality control standards--such as
specifications relating to the size or scope of the work, quantity and
quality standards, deadlines, morality clauses, or specifications
regarding the use of standardized products, services, or advertising to
maintain brand standards--do not make joint employer status more or
less likely. Quality control measures are focused on the goods and
services themselves by determining criteria for an acceptable work
product or service and evaluating the end work product in light of
those criteria, as opposed to actions directed toward the day-to-day
management of the other business' employees. However, if a potential
joint employer engages in day-to-day supervision of the other business,
becoming involved with employees' firing or disciplinary actions,
scheduling, or other conditions of employment, such actions would be
relevant in assessing joint employer status.
Courts have drawn this distinction repeatedly. In Zheng, the Second
Circuit acknowledged that the supervision of employees can be evidence
of control indicative of a joint employment relationship, but
emphasized that ``supervision with respect to contractual warranties of
quality and time of delivery has no bearing on the joint employment
inquiry, as such supervision is perfectly consistent with a typical,
legitimate subcontracting arrangement.'' 355 F.3d at 75. Similarly, in
Singh, the court rejected the plaintiffs' arguments that requiring a
franchisee location to be open 24 hours a day constituted ``control of
employee work schedules or conditions'' under the Bonnette analysis, as
the policy was ``merely reflective of an inherent interrelation of
operations between the two entities and 7-Eleven's goal of attaining
conformity to certain operational standards and details.'' 2007 WL
715488, at *4-5. And in Jacobson v. Comcast Corp., the court concluded
that
[[Page 21901]]
quality control procedures intended to provide reliable service to
cable customers such as ``monitor[ing] the location of technicians,''
``specif[ying] the time at which [technicians] are supposed to arrive
at appointments,'' and ``regularly evaluat[ing] completed work to
ensure that it meets standards,'' was ``qualitatively different from
the control exercised by employers over employees.'' 740 F. Supp. 2d
683, 691-92 (D. Md. 2010); see also Mitchell v. Hertzke, 234 F.2d 183,
190 (10th Cir. 1956) (concluding that ``[contractual] powers . . .
limited to determining the time and conditions of the planting, the
conditions under which the beans were to be raised, and the time when
they were to be harvested'' was insufficient to establish that a
vegetable canning company jointly employed the farm workers of its
suppliers).\261\
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\261\ See also 85 FR 2843 n.86 (citing cases).
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As these cases illustrate, quality control measures are often
integral to modern business. Without evidence showing that an entity's
enforcement of such measures is affecting the working conditions of the
employees who work for one or more other employers, they do not
establish or indicate joint employer status. This proposed guidance
would assist companies in understanding any possibility of joint
employment when considering actions to safeguard their brand integrity.
4. Other Common Business Practices
The Department also proposes to readopt in Sec. 791.125(d)
regulatory text providing that certain common basic business
practices--such as providing another employer with a sample employee
handbook, offering an association health or retirement plan to another
employer or participating in such a plan with the employer, or jointly
participating in an apprenticeship program with another employer--does
not make joint employer status more or less likely under the FLSA.\262\
By providing these kinds of additional resources to employers,
potential joint employers are giving employers access to a greater
degree of business expertise, training resources, and benefit plans
than they would be able to attain on their own--all of which benefit
employees generally. Concerns about incurring joint employer liability
should not deter businesses from providing such resources.
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\262\ Proposing to clarify that offering or participating in an
association health or retirement plan does not make joint employer
status more or less likely under the FLSA would not impact the
interpretation of ``employer'' under the Employee Retirement Income
Security Act (ERISA) because ERISA defines ``employer'' differently
than the FLSA. See 29 U.S.C. 1002(5) (defining ``employer'' under
ERISA to mean ``any person acting . . . in relation to an employee
benefit plan'' and to include ``a group or association of employers
acting for an employer in such capacity'').
---------------------------------------------------------------------------
In sum, the Department continues to believe that the aforementioned
programs and resources serve practical ends for businesses and workers,
but do not themselves indicate control over employment. Of course, if a
potential joint employer took actions such as enforcing the terms of a
franchise handbook against a franchisee's employee, directing an
employer's employee to participate in a joint apprenticeship program,
or exercising control over an employer's employee who worked on its
premises, those actions could indicate joint employer status.
5. Omission of the 2020 Rule's Guidance Regarding a Business That
Allows Another Employer To Operate on Its Premises
The Department does not propose to include a provision advising
that ``allowing [another] employer to operate on its premises
(including `store within a store' arrangements)'' does not make joint
employer status more or less likely under the FLSA. Several courts have
identified an entity's ownership of the premises where work is
performed to be a relevant factor in assessing whether the entity is a
joint employer. See Moreau, 356 F.3d at 947 (considering ``whether the
premises . . . of the employer are used for the work''); Zheng, 355
F.3d at 72 (same); see also Salinas, 848 F.3d at 141 (considering
``[w]hether the work is performed on a premi
[…truncated; see source link]Indexed from Federal Register on April 23, 2026.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.