DOL Unveils New Proposed Rule for Joint Employer Liability

Speaker A: M In today's workplace, things are evolving quickly and complexity is the norm. But clarity is a choice. This Week at Work is where leaders get practical solutions and timely insights for today's toughest workplace challenges.

Speaker B: Hello, everybody. I'm Phil Brandt, President and CEO of AIM Employers Association. Welcome back to another episode of this Week at Work. The proposed Department of Labor rule creates a nationwide standard for determining joint employer liability by focusing on actual employer control over key employment decisions using separate tests for vertical and horizontal employment relationships. It also clarifies that common business arrangements alone do do not create joint employer status and encourages employers to review relationships with staffing firms, subcontractors and franchises for compliance. To give us more insight on joint employer liability, I'd like to welcome my co host of 366 episodes, shareholder from Ogletree Deacons, Bert Garland. Welcome, Bert. How are you today?

Speaker A: I'm doing great, Phil, how are you today?

Speaker B: Um, I'm doing well. Uh, this is a topic. It's kind of near and dear to us. I feel like we've talked about this for 366 episodes, and it just keeps swinging back and forth.

Speaker A: Yes, it is, truly, as the pendulum swings, uh, on this one, as we have moved from, uh, I think through three presidential administrations while we've been doing this program, uh, Trump to Biden back to Trump, and, uh, you know, we, we. That pendulum has swung wildly.

Speaker B: Yeah. So, uh, let's go forward again. It sounds like it's going to be new and some, uh, some interesting twists to it, and let's, uh, dig in. But before we do that, how about a little lawyer on the clock? You got anything new? Anything new you want to talk about?

Speaker A: Of course, there's plenty going on that's, uh, of interest to people. Just hot off the presses, literally. On the day we're making this recording today, June 4, 2026, the Equal Employment Opportunity Commission issued its new national enforcement plan for fiscal years 2025 through 2029. This officially, uh, rescinds the previous strategic enforcement plan, uh, for fiscal years 2024 through 2028 that was put in place by the Biden administration on the way out the door. And so this is the new Trump administration, uh, new national, uh, enforcement plan. And I'm just trying to make our audience aware that this is out there. Uh, it focuses on a few core principles. There's a three pronged approach, first of all on prevention and outreach and voluntary resolution, followed by strong litigation. And this, uh, is a little bit different than the Biden administration, which favored litigation.

Speaker B: So it's interesting. Hey, you guys work it out or there's going to be strong litigation.

Speaker A: Yes.

Speaker B: Yeah.

Speaker A: Uh, so, uh, there's also a very strong emphasis on disparate treatment over disparate impact theories of liability. The agency is going to prioritize intentional discrimination and largely de, Emphasize or eliminate disparate impact claims. Uh, individualized assessment of cases. Broad enforcement is not strictly listed, limited to the listed priorities. Uh, and they're also looking to collaborate with other federal, state and local agencies. Uh, the next piece, uh, of this would be the substantive, uh, enforcement priorities. Uh, number one, they're going to return to a focus on intentional or systemic cases. Uh, they're also going to look to develop the law in cases testing recent Supreme Court precedents, like Students for Fair Admissions, uh, which of course is the Harvard case that said race cannot be taken into account in admissions. A case that's near and dear to this program. Muldrow versus the city, uh, of St. Louis.

Speaker B: Yeah, we talked a lot about that one over the years.

Speaker A: Yep. Grof versus DeJoy, which we've talked about extensively in Bostock. Uh, so that's the same, uh, uh, uh, uh, sex discrimination, uh, uh, rights, uh, case. Um, so the EEOC is going to be looking to test those, uh, the chair's priorities. Last piece I'll talk about on this. There's four explicit ongoing priorities. Remedying DEI related race and sex discrimination. Protecting American workers from anti American national origin discrimination. Defending women's rights to single sex spaces at work and the right to express the binary nature of sex. And protecting religious liberty and accommodation rights. So those are the new, uh, enforcement priorities from the eeoc. And again, this runs from effective, uh, immediately, uh, through 2029. Wow.

Speaker B: So, um, what, as you're reading through all that and you're like, hey, well, we've talked about this case and that case and we've talked about, you know, these Department of Labor joint employer rules. Um, it starts, you start to realize really how informative some of the things that we've been doing is. Right. It's not, it's the aggregate of all of that because so many things that you just covered we have had as topics on the program. Um, and it's, it's. I don't know, it's kind of refreshing. Most of this time I'm like, I think you're making things up, Bert. But, uh, obviously it, it's important stuff and we encourage people that if there are any of these things, we do have all those episodes, uh, listed on YouTube or on our website. Where you can go back and pick up on them if they're important to you.

Speaker A: Unlike AI Phil, I don't hallucinate. I don't do drugs, so I don't hallucinate. Okay? Not. I'm not making this up.

Speaker B: Well, I know you pretty well. Um, so I'm going to just stop right there. We're going to keep this very professional. Um, but, uh, let's get moving on, uh, with our topic here. We want to talk a little bit about the U.S. department of Labor's new proposed rule for joint employer liability. Again, like we said, we've talked about this one a lot, and it keeps swinging back and forth. Um, Bert, but this one touches multiple laws and industries. Um, what is it that hr, um, professionals and business leaders want to be aware of right off the bat?

Speaker A: Well, we mentioned that pendulum swinging back and forth from Trump 1 through Biden, and now to Trump 2. So this is the Department of Labor's first attempt since 2021 to craft a joint employer standard across the Fair Labor Standards act, the Family and Medical Leave act, and other particular laws. It aims to bring clarity by articulating a nationwide test while recognizing how vertical and horizontal joint employer employment operates. Uh, employers should really understand the key factors that the DOL will examine and how this could reshape relationships with staffing agencies, subcontracting subcontractors, and franchise partners.

Speaker B: So, Bert, what does it mean if someone is not familiar with vertical and horizontal joint employment relationships? Uh, just. Can we break that down just a little bit for our listeners?

Speaker A: Phil? That's a really good question. So, vertical joint employee employment, you can think of it really, when. That's when one employee works for two employers at the same time. And you would normally see that in a typical staffing agency situation where the staffing agency and the client company, uh, if they're both directing the work of the one employee, both of those employers can be liable, uh, as employers under, uh, fmla, the Fair Labor Standards act, et cetera. Uh, horizontal joint employment would typically refer to a situation where an employee would be working separate hours for two or more related employers in the same workweek. And so you might think of a situation where a, uh, restaurant, for example, they may have several different restaurant concepts that are under one type of controlled group, one overarching entity, and the employee is doing work at two different restaurants. That can also be considered joint employment.

Speaker B: Okay. Hey, that's why you're Bert Garland, shareholder, Ogletree Deakins. All right. Hey, uh, that's a good clarity. Thanks for that what is it that if we think about like what's driving this new proposed rule and how does it differ from, you know, what we've seen in the past?

Speaker A: So the DOL rescinded, uh, as soon as Biden's DOL, uh came into play, uh, they rescinded a 2020 rule that was from the Trump administration that focused really narrowly on actual control and was largely vacated by a court. The new proposal is meant to unify joint employer standards across uh, the various laws, uh, in particular the Fair Labor Standards act and the Family, uh, Medical Leave act and align with long standing case law and resolve circuit splits, uh, splits in the federal circuits where the federal circuits have ruled differently. So it recognizes both a potential employer's reserved right to control, the actual exercise of control, uh, moving away from an overly restrictive test from the prior administration.

Speaker B: M. Okay, um, and as we think about it, like this proposed four factor test for determining joint employer employment, uh, can you give us any insight of what that looks like?

Speaker A: Yeah, and we're going to really focus just on vertical joint employment. And so this newest test, ah, basically says it evaluates whether a potential joint employer can do one of four things. Number one, whether they can hire or fire the worker. Number two, whether they supervise and control the worker's schedule or conditions of employment to a substantial degree. Number three, whether they determine the workers rate of pay and method of payment. And number four, whether they maintain the employment records. Now of course no single factor is going to be dispositive. The analysis is really going to be holistic and guided by the realities of the relationship.

Speaker B: Yeah, you know I think about that, um, and one in the past when I was in practicing HR and we would use temps in different businesses, um, working with the temp agency, one of the things back then we did. Now this is a little while ago, um, we would, you know, we would work with the agency to get certain temporary um, providers, uh, employees temp help at a certain rate of pay so we could retain them, um, or attract the right skills. Um, and you know of course then there's an upcharge and that would create um, a pay scale if you will. And we worked with them to determine what that was so that they could hire the help that we needed. And I'm going to guess some of that still happens today. I heard you say not any one, um, element of the test stands solely on its own. But that would be a practice that could qualify in that case.

Speaker A: I think that's right. I think that that element is one of Those four that I listed, number three, which was, determines the worker's pay rate and method of payment. So if you are negotiating with the staffing company, uh, the Department of labor is likely to look at what the substance of those negotiations was.

Speaker B: Right. And then if you have, you know, a first line supervisor, it's got someone standing in, um, and then you're saying, okay, hey, I need you to go over here and do some inventory count or whatever you're asking them to do. And that supervisor is your supervisor. Um, that would be a second test that might qualify. I mean these are kind of the common ways I remember it working. I believe it still works that way in many ways. And often they even train next to your employees, um, on how to do certain tasks of the job.

Speaker A: Yeah, and that's exactly right. It's the level of, uh, control that that frontline supervisor might have. I always suggest when I'm advising, uh, clients on relationships with staffing agencies, it is always a best practice. It's not always feasible, but it's always a best practice for the staffing agency to have its own on site manager, uh, at the location. Uh, and so when the client employer, uh, wants to take some sort of action, either disciplinary or perhaps termination or something else, uh, with respect to that staffing agency employee, that ah, client, uh, employer, the supervisor for that client employer goes to the staffing agency supervisor, says what's going on? And lets the staffing agency supervisor deal with the situation.

Speaker B: Yeah, and then I know this one still happens, um, very often. And you'll have a manager, a supervisor, someone that's in charge of, you know, someone's productivity, uh, and, or the oversight of your own business, working with the temp, and they'll call the agency or they'll go to the supervisor and they'll say, hey, I don't want this person back tomorrow. Bring me someone else. Does that qualify as firing the person?

Speaker A: No, not really. I mean again, if it's, if there's a nuance there, if the supervisor for the client employer says to the staffing agency employee, you're out of here, you're done, don't come back, uh, that's kind of exercising direct control. They pick up the phone or go to the staffing agencies on site supervisor and say, hey, this person's not doing the job correctly, you guys, as the staffing agency are not performing properly, uh, we don't want this individual to continue working, uh, at our site. Uh, and then the staffing agency is the entity that goes out and does, uh, the Disciplining or the termination. That's a safer approach.

Speaker B: Mhm. Okay, interesting. All right, another question for you here, uh, Bert, is how does the Department of Labor weigh an employer's reserve right to control against the actual exercise of control under the proposed test?

Speaker A: Yeah, and I think this is where kind of the rubber meets the road between the prior administration and the current administration. The proposed rule states that the ability, power or reserved right to act in relation to the worker remains relevant, but that actual exercise and control is much more relevant. So again, this is a nuanced position that departs from the 2020 rule, the prior Trump administration rule, administration's rule that had uh, a strict requirement of actual control while acknowledging that a reserve right alone is insufficient to establish joint employer status. And I think, uh, you know, an example I often use, uh, to illustrate this situation would be let's take a uh, fast food, uh, franchisee situation and you might have the corporate, uh, the franchisor who specifies that employees have to prepare food a certain way and that employees have to wear certain uniforms. So that is some sort of uh, theoretical, uh, or potential control of the employee, but it doesn't necessarily affect the quote, unquote terms and conditions of the employee's employment with the franchisee. And so I don't think in that situation, I, uh, think this rule, new rule is designed to make sure that employees of a franchisee are not deemed to be employees of franchisor.

Speaker B: Okay, yeah, that's a little bit of a tongue twister. A little bit. All right, let's go on to this one here. And we talked in the beginning a little bit about how this really expands, um, um, pretty broadly. So how, how does the proposed rule interact with the National Relay, National Labor Relations Board separate joint employer standard under the nlra?

Speaker A: So the DOL acknowledges in its proposed proposed uh, rule, uh, that governs enforcement under wage and our laws that the NLRB issued a final rule focusing on whether employers share or co determine the essential terms and conditions of employment under the nlra. Employers have to be mindful that both standards, which may not align perfectly, uh, are in play and they should consult counsel to navigate those differences if they have a real concern. Mhm.

Speaker B: Okay. And I know we're kind of in the proposed rule stage, but is there any steps that employers should be taking now to evaluate their relationship and potentially mitigate any liability under this rule?

Speaker A: Yeah, I mean definitely the employer should review contracts and arrangements with staffing firms, subcontractors, franchisees and other partners to really figure out who does the hiring, the supervision and who pays the workers. Uh, they should document independent business operations, examine whether they maintain the employees records and adjust policies to minimize joint employer findings, and of course keep up to date on both the Department of Labor and NLRB developments uh, in this area. That's essential. And keep tuning into this week at work because we, we touch on this quite a bit.

Speaker B: Yeah, I know this won't be the last time we're talking about it. Um, and I know traditionally like Ogletree usually does submit comments, but if stakeholders wanted to do that themselves, how, how can employers effectively participate in this process?

Speaker A: We're in the uh, notice of proposed rulemaking, uh, phase right now and so that invites comments within 60 days of its publication. So we are in that period right now. Typically an employer would work with legal counsel to craft feedback that addresses practical implications, uh, support or critique the four factor test and suggest clarifications. Participation can influence the final rule and help to ensure it reflects real world employment relationships. If they don't want to work with counsel, there is a mechanism for them to submit those uh, comments directly, uh, to the Department of Labor during this uh, notice of proposed rulemaking.

Speaker B: Because of the proposed rule, um, is interpretive guidance for the Department of Labor. How much certainty does it provide and could court still apply their own test?

Speaker A: That's a really good question, Phil. The Department of Labor emphasized that the proposed rule would guide its investigators and enforcement personnel, but does not bind the courts. And I know we've talked quite a bit on this program about loop or bright. Uh, I think that this uh, proposed rule takes into account the Supreme Court's ruling in looper Bright. And uh, so judges can and will apply their own joint employer analyses based on the Fair Labor Standards act and the fmla. Employers should view the proposal as informative rather than definitive, uh, and should stay tuned for judicial interpretations. And I think again, kind of getting back to loop or bright. Uh, the Luper Bright decision of course said that uh, it's the courts that need to make these interpretations, not the administrative agencies and that the courts themselves do not need to rely on on what the administrative agencies, uh, say. And what this will hopefully do is when we go from administration to administration, it will stop that pendulum from swinging so wildly. I uh, think this new rule, also the four step approach or the four factor test that's uh, offered is consistent with what we've seen coming out of the majority of the courts, uh, the last several years. And so it sort of synthesizes those uh, court decisions into a rule that hopefully we can get used to and not have to change the next time the presidential administration changes.

Speaker B: Absolutely. Having some stability is always nice. So let's just look ahead and maybe share what are some of the key takeaways some of our listeners should, uh, remember as the joint employer landscape just continues to evolve.

Speaker A: Yeah. So first, we obviously have to understand that joint employer liability spans multiple employment laws. It goes across the Fair Labor Standards act, the fmla, uh, it applies in the eeo, uh, settings, equal employment opportunity settings. Uh, so you have to understand that it does go across various employment laws. Second, everybody's going to need to know the four factor test and how their relationships measure up to that four factor test that I described before. Third, we're going to have to keep our eye on the developments, uh, at the Department of Labor, the National Labor Relations Board and of course the courts. And then finally proactively review contracts and submit, submit feedback during the comment period to help shape the final rule.

Speaker B: Yeah, absolutely. All right, Bert. Well, that concludes the program for today. I appreciate everyone joining us. Um, we'd always love to hear your comments and what you're more interested in hearing us discuss and we'll try and take that into account. Bert, if someone wants to reach out to you because they need some help, how do they do that?

Speaker A: Of course, email, uh, is probably the best way. Burton B U R t o n.garland g a r l a n d@ogletree.com

Speaker B: and for all of our AIM members, you can always reach out to your AIM advisor and we'll help you from there. We have Amy Hart on our website. She's available as well to help you our AI solution. Um, and you can reach out to our Solutions team, uh, by email and at uh, uh, solutions.team.org. uh, our phone number, as always, has not changed. 314-754-0236. We hope to talk to you soon. Now it's the beginning of summer. Let's go out and be good to someone.

Speaker A: Take care of Sam.