Most general contractors draw a clear line between their employees and their subs'. On paper, the distinction is straightforward. In practice, if your project managers are directing daily work on site, that line is exactly what the Department of Labor's (DOL) proposed joint employer rule puts under scrutiny.
On April 22, 2026, the DOL issued a notice of proposed rulemaking (NPRM) establishing a new four-factor test for vertical joint employment 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 general contractor (GC)/sub structure isn't a hypothetical in this rule — it's named as a primary example. And one of the four factors is whether your company maintains the workers' employment records.
This is still a proposed rule. The comment period closes June 22, 2026 — nothing is final yet. But the framework it describes is consistent with how DOL enforcement has been operating, and it's worth understanding now.
The rule addresses two scenarios. Horizontal joint employment applies when a worker works for two related entities in the same workweek. Vertical joint employment applies when a worker is formally employed by one company but simultaneously benefits another — the GC/sub relationship is the construction industry's version of this.
The comment period runs through June 22, 2026. Employer obligations don't change unless a final rule is issued. But the DOL has framed this NPRM as a codification of how it already conducts enforcement, which is reason enough to pay attention. For a plain-language breakdown of both joint employment types, see our overview of vertical vs. horizontal joint employment.
Direct answer
Under the DOL's proposed rule, a general contractor can be held liable for a subcontractor's employees — depending on how much control the GC actually exercises over how that work gets done.
If the GC qualifies as a joint employer under the four-factor test, it's jointly and severally liable for any FLSA, FMLA, or MSPA violations — including unpaid wages, overtime, and liquidated damages — even for workers it doesn't directly pay.
The proposed rule establishes a four-factor balancing test to determine whether a GC qualifies as a joint employer of a subcontractor's workers. A finding in favor of joint employer status is more likely if the GC:
No single factor is determinative — the DOL weighs them as a whole. A unanimous finding in either direction creates what the rule describes as a "substantial likelihood" regarding joint employer status.
One nuance construction operators need to understand: the proposed rule says a GC's reserved contractual right to control workers is relevant to the analysis, even if that authority is never exercised. Actual exercise of control counts for more — but a contract clause giving you the right to approve timesheets or discipline subcontractor workers isn't invisible to enforcement. Review subcontractor agreements with that in mind.
The four factors are the primary analysis, but the rule leaves room for additional considerations where they're material. Two worth flagging for construction operators: whether the subcontractor's workers have a continuous or repeated relationship with the GC's projects, and whether the work is performed on premises owned or controlled by the GC. A long-running site where the same sub crews show up week after week on GC-owned land isn't automatically joint employment — but both of those facts can be weighed.
The NPRM is explicit that certain common GC practices don't establish joint employer status on their own. Requiring subcontractor workers to comply with your site safety protocols, pass background checks for site access, or follow your general quality standards does not automatically make you their employer.
The DOL provides a specific example in the rulemaking: a property owner requires all workers on its remodel project — employed by a GC and its subs — to follow safety rules and clear background checks. That requirement alone doesn't create joint employment.
The operative phrase is "on their own." Safety requirements paired with day-to-day scheduling control, approval authority over pay, and your own recordkeeping of those workers' hours is a materially different situation. The test is about the totality of actual control, not any single practice in isolation.
June 22, 2026
Comment period deadline for the DOL's proposed joint employer rule — and the last date to submit through regulations.gov (Docket WHD-2026-0067).
Of the four factors, maintaining employment records is the one a general contractor can actively manage — and it's a direct signal to enforcement of whether your operation maintains clean separation between your workforce and your subs'.
If your time and attendance data, payroll records, and project labor documentation clearly show that subcontractor workers are tracked, paid, and managed by the subcontractor — with no parallel recordkeeping on your side — that supports a clean separation argument. Complex multi-entity payroll environments are where this gets hard.
The problem arises when construction companies run payroll across multiple projects with inconsistent recordkeeping: project managers collecting timesheets directly from sub workers, GC staff approving sub workers' hours, or shared systems where employment records blur together. That's exactly the kind of factual record enforcement examines.
Automated payroll tax compliance and clean audit-trail documentation aren't just operational hygiene — under this proposed framework, they're part of the evidentiary picture.
One important qualifier: the rule is explicit that maintaining employment records alone will not establish joint employer status. A clean paper trail supports a separation argument — it doesn't make one on its own. What it does is remove a factor that would otherwise count against you. That's meaningful, but it's not a shield. The analysis still turns on the full picture of actual control.
The rule isn't finalized, and it may change. But the four-factor framework in the NPRM mirrors how courts have approached vertical joint employment for years. Waiting for a final rule isn't a strategy.
The comment period closes June 22, 2026. If your legal team has concerns about how the proposed framework would apply to your contracting arrangements, there's still time to submit comment through regulations.gov (Docket WHD-2026-0067, RIN 1235-AA48).
Not on its own. The DOL's proposed rule states that requiring workers to comply with general safety standards, pass background checks for site access, or meet quality requirements does not automatically establish joint employer status. The test focuses on actual control over hiring, scheduling, pay, and records — not compliance mandates that apply broadly to all site personnel.
Vertical joint employment applies when a worker is formally employed by one company but another company benefits directly from that work — the GC/sub relationship is the construction industry's version of this. Horizontal joint employment applies when a worker works for two related entities in the same workweek, typically connected by shared ownership or management. For most construction operators, vertical is the relevant scenario.
Joint and several liability. Both the GC and the subcontractor would be individually liable for any violations of the FLSA, FMLA, or MSPA owed to affected workers — including unpaid wages, overtime, liquidated damages, and attorneys' fees. That exposure exists even for workers the GC never directly paid.
No. This is a proposed rule, not a final one. The comment period closes June 22, 2026, and the DOL will review submissions before deciding whether and how to finalize. No employer obligations change until a final rule takes effect. That said, the four-factor framework mirrors how courts and DOL enforcement have approached vertical joint employment for years — the analysis isn't new, even if the regulation is.
Your own employees' records only — timesheets, pay rates, hours worked, and deductions — maintained separately from any records that touch subcontractor workers. Under the proposed rule, maintaining employment records for sub workers points toward joint employer status. The goal is clean separation: your systems document your workforce; your subcontractors document theirs.
Greenshades is built for multi-sub, multi-project environments where getting the records right isn't optional.
Request A DemoNote: This information is for informational purposes only and does not constitute formal tax, legal, or compliance advice. Always consult with qualified tax advisors, legal counsel, and your organization's internal teams for guidance specific to your situation. Additional regulations may apply. For the most accurate and up-to-date information, refer to official government resources and regulatory agencies.