Joint employment means more than one company is legally responsible for the same worker. It sounds straightforward. The complication is that it shows up in two very different ways — and each one creates a different compliance problem.
The distinction between vertical and horizontal joint employment isn't just legal trivia. Vertical joint employment determines who's liable for wage violations. Horizontal joint employment determines how overtime is calculated. Getting them confused leads to the wrong fix.
Under the Fair Labor Standards Act (FLSA), an employer is broadly defined as any person who "suffers or permits" a worker to work. That definition is intentionally wide. It means a company doesn't need to be the one writing paychecks to be on the hook for payroll compliance.
Joint employment exists when two or more companies meet that definition for the same worker at the same time. Both can be held jointly and severally liable — meaning if one can't pay, the other owes the full amount.
Direct answer
Vertical joint employment exists when a worker is formally employed by one company but another company simultaneously benefits from and directs that work. The question enforcement asks is whether the second company functions like an employer — regardless of what the contract says.
If it does, both companies are jointly and severally liable for wage violations, unpaid overtime, and leave obligations.
The most common examples are staffing agency workers directed day-to-day by a client, and subcontractor workers whose schedules and conditions are controlled by a general contractor. The formal employment relationship runs one direction. The actual control of the work may run another.
Under the DOL's proposed 2026 joint employer rule, vertical status is determined by a four-factor test: whether the second company hires or fires the worker, supervises their schedule or conditions to a substantial degree, determines their pay rate and method, or maintains their employment records. A unanimous finding across all four factors creates a strong likelihood of joint employer status — in either direction.
Horizontal joint employment is a different scenario entirely. It applies when a worker works separate hours for two related employers in the same workweek — and those employers are sufficiently associated with each other that their hours must be aggregated for overtime purposes.
The question here isn't about control over how work gets done. It's about the relationship between the two employers. Related entities under common ownership, or employers who share or interchange employees by arrangement, are the typical cases.
If a worker puts in 25 hours at location A and 20 hours at location B, and both are joint employers, that's 45 hours in a workweek — 5 of which trigger overtime. Neither employer alone would owe overtime. Together, they both do.
Vertical and horizontal joint employment aren't just two types of the same problem. They require different responses.
Vertical joint employment is a liability question. If a client company exercises sufficient control over a staffing agency's workers, both companies share responsibility for wage violations, unpaid overtime, leave obligations under the Family and Medical Leave Act (FMLA), and related claims — even if the agency issued the paychecks correctly. The exposure runs both directions.
Horizontal joint employment is a calculation question. Are hours across related employers being aggregated correctly? Is overtime being triggered — and paid — based on total hours across the workweek, not just hours at each individual location?
In practice, vertical scenarios tend to involve more complex liability exposure. Horizontal scenarios tend to surface in multi-location operators, healthcare systems with employees who float between facilities, and hospitality groups with shared staff.
Staffing agencies are the DOL's primary example of vertical joint employment. When a client company directs a placed worker's daily schedule, sets productivity expectations, and controls on-site conditions, factors one and two of the vertical test are already in play — even if the agency handles payroll and HR. See how the proposed rule applies to staffing agency–client relationships →
The construction industry's version of the same dynamic. If a general contractor's project managers approve sub workers' schedules, assign daily tasks, or step into supervision roles on site, vertical joint employment exposure exists regardless of how the subcontract is written. See how the proposed rule applies to GC/sub relationships →
The most common horizontal scenario. Two locations under the same ownership that share employees, healthcare facilities that float nursing staff between sites, or any arrangement where the same worker regularly logs hours for more than one related entity in the same week. Each of these can trigger hour aggregation and overtime obligations that wouldn't exist if hours were counted separately.
June 22, 2026
Comment period deadline for the DOL's proposed joint employer rule — the first codified nationwide standard since 2021.
In April 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 FLSA, the FMLA, and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The comment period closes June 22, 2026.
The rule matters because the DOL hasn't had codified joint employer regulations since 2021. Courts and enforcement teams have been operating without a single standard, and the proposed rule is designed to close that gap. For vertical joint employment specifically, it formalizes the four-factor test and restores the relevance of contractual rights — not just actual exercise of control.
The rule doesn't change what vertical and horizontal joint employment are. It changes how clearly enforcement can prove it.
Vertical joint employment exists when one worker's labor simultaneously benefits two companies — the question is whether the second company exercises enough control to qualify as a joint employer. Horizontal joint employment exists when a worker works separate hours for two related employers in the same workweek — the question is whether those employers are associated enough to require hour aggregation for overtime purposes. Vertical is a liability question. Horizontal is a calculation question.
Yes. Joint employer status is determined by the economic reality of the relationship, not by what a contract says or what a company intends. A client that routinely directs a staffing agency's workers, or a parent company that controls the day-to-day employment conditions of a subsidiary's staff, may be a joint employer regardless of how the arrangement is labeled. The proposed 2026 DOL rule reinforces this: reserved contractual authority counts, even if it's never been exercised.
It depends on the type. In a horizontal joint employment scenario, hours across all joint employers must be aggregated in a single workweek to determine overtime eligibility, and both employers can be jointly and severally liable for any overtime owed. In a vertical joint employment scenario, the overtime obligation itself may not change — but the number of parties liable for it does. If the primary employer can't pay, the joint employer owes the full amount.
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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.