Staffing agencies have always operated in the space between two employers. A proposed rule from the Department of Labor (DOL) makes that space a lot more legally significant.
On April 22, 2026, the DOL's Wage and Hour Division published a Notice of Proposed Rulemaking establishing a single nationwide standard for determining joint employer status under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The comment period closes June 22, 2026. If finalized, the rule will change how staffing agency–client relationships are evaluated for shared wage and hour liability — and the two most significant changes both increase exposure for agencies.
The DOL's proposal fills a regulatory void that has existed since 2021, when the prior administration rescinded the 2020 joint employer rule. The new proposal uses the same four-factor core as prior joint employer standards, but departs from the 2020 rule in ways that broaden exposure for staffing models — restoring the relevance of reserved control, allowing economic dependence as a supporting factor, and drawing on a wider statutory basis.
One significant change: the proposed rule applies a single joint employer standard across three federal laws simultaneously — the FLSA, the FMLA, and the MSPA. Prior standards applied different tests under each law. This proposal aligns them to a single FLSA-based framework and, in doing so, extends joint employment exposure to leave obligations under the FMLA. Joint employment exposure now covers unpaid wages and unpaid leave.
The DOL's own example of vertical joint employment — the more common of the two types recognized by the rule — is a staffing company whose workers are supervised by a client. That's not a coincidence. The agency–client arrangement is the clearest real-world application: one employer formally employs the worker, while another benefits from and directs that worker's day-to-day activity.
Direct answer
Under the proposed DOL rule, a staffing agency's client can be found to be a joint employer if it exercises — or reserves the right to exercise — substantial control over workers' hiring, scheduling, pay, or employment records.
If found to be joint employers, both the agency and the client can be held jointly and severally liable for wage violations, unpaid overtime, and damages under federal law. The comment period closes June 22, 2026.
To determine whether a client qualifies as a joint employer, the proposed rule applies a four-factor balancing test. No single factor is determinative — the totality of circumstances governs. The four factors are:
Most staffing agencies will recognize these factors immediately. Client companies routinely direct daily schedules, set productivity expectations, and manage on-site conditions. That's the work. Under this rule, that's also evidence.
For a plain-language breakdown of how vertical joint employment differs from horizontal joint employment, see our overview of both types and what each means for payroll.
The 2020 rule largely limited joint employer findings to situations where a company actually exercised day-to-day control over workers. The new proposal restores the relevance of contractual rights — meaning provisions in client contracts that reserve the right to supervise, discipline, or adjust pay can be weighed against you, even if those rights are never exercised. Standard staffing contracts often include exactly these kinds of provisions.
The 2020 rule explicitly rejected economic dependence as a factor in joint employer status. The proposed rule softens that position — it doesn't make economic dependence a primary factor, but it declines to exclude it entirely. For workers whose livelihood is substantially tied to a single client placement, that shift matters.
June 22, 2026
Comment period deadline for the proposed joint employer rule. Agencies that wait for finalization to assess risk will be starting from behind.
When two employers are found to be joint employers, they share exposure equally. If a client company is found to have violated wage and hour rules, your agency can be held liable for the full amount — unpaid wages, overtime, liquidated damages, and attorneys' fees — even if you issued the paychecks correctly.
The reverse is also true. If your agency has a payroll error, a client that exercises substantial control over those workers may share in that liability. The proposed rule creates a bidirectional exposure that most staffing contracts aren't currently written to address.
The comment period is open until June 22. The rule isn't finalized. But the agencies that fare best under any version of a joint employer standard are the ones that already have clean, documented payroll operations — not the ones scrambling to comply after the fact.
Four areas worth reviewing now:
The agencies best positioned here aren't necessarily the ones with the most restrictive contracts. They're the ones with the clearest documentation of how payroll and supervision actually work.
The comment period closes June 22, 2026. Staffing agencies and other affected employers can submit comments to the DOL's Wage and Hour Division through regulations.gov (Docket WHD-2026-0067, RIN 1235-AA48) through that date.
Vertical joint employment occurs when a worker is formally employed by one company but also benefits another — the DOL's primary example is a staffing agency whose worker is directed by a client. The proposed rule evaluates whether the client exercises sufficient control over the worker to qualify as a joint employer, using a four-factor balancing test focused on hiring authority, supervision, pay-setting, and recordkeeping.
The four factors map directly to the agency–client relationship. Clients that direct workers' daily schedules, set performance expectations, or maintain any employment records may satisfy one or more factors — even if they don't formally employ the worker. No single factor is dispositive; the totality of circumstances determines the outcome.
Yes. If a client is found to be a joint employer, both the agency and the client are jointly and severally liable for FLSA violations — including unpaid wages, overtime, liquidated damages, and attorneys' fees — even when the agency processes payroll. The exposure runs both directions: the agency can also share liability for violations tied to a client's control.
Yes. Unlike the 2020 rule, the proposed rule applies the same joint employer framework to the FLSA, FMLA, and MSPA. Prior standards applied different tests under each law; this proposal aligns them to a single FLSA-based framework. If a client qualifies as a joint employer, it may share responsibility for FMLA leave obligations as well as wage-and-hour compliance — a materially broader exposure than prior standards.
The comment period closes June 22, 2026. The rule is proposed, not final. Staffing agencies and other affected employers can submit comments to the DOL's Wage and Hour Division through regulations.gov (Docket WHD-2026-0067, RIN 1235-AA48) through that date.
See how Greenshades helps staffing agencies document and defend payroll compliance — regardless of how the final rule lands.
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