The Department of Labor announced in May 2026 that it is considering a new proposed rulemaking on joint employer status under the Fair Labor Standards Act. The move follows years without a clear federal standard, a gap that has left businesses uncertain about when they share wage and hour liability with a staffing agency, a contractor, a franchisee, or another business that shares workers.

For small and mid-size businesses in Tennessee, Georgia, Florida, North Carolina, Virginia, and across the Southeast, the question of joint employer status is not abstract. If a court or the DOL determines that you and another business are joint employers of the same workers, both businesses can be held liable for wage violations, including back pay, overtime, and payroll compliance failures committed by the other party.

What Joint Employer Status Means in Practice

Joint employer status under the FLSA arises when two or more businesses are found to share or co-determine the essential terms and conditions of employment for the same workers. The classic examples involve staffing agencies that supply workers to a host employer, contractors and subcontractors working on the same job site, and franchise arrangements where the franchisor exercises control over staffed workers.

When the DOL or a court finds joint employer status, it means both businesses share responsibility for meeting FLSA requirements. That includes paying at least the applicable minimum wage, calculating overtime correctly across all hours worked for both employers combined, and maintaining the required payroll records. A violation by one business can result in liability for both.

The current regulatory gap dates to 2021, when a prior joint employer rule was vacated by a federal court. Since then, businesses have had to rely on a mix of case law and the DOL's enforcement posture to understand their exposure. The new proposed rulemaking is intended to replace that uncertainty with a clearer standard, but until a final rule is published, the prior case-by-case analysis still applies.

WHD Administrator Andrew Rogers confirmed at the PayrollOrg Capital Summit in March 2026 that joint employment is one of the areas where the DOL intends to provide greater regulatory clarity, describing it as a place where employers and workers have requested clarity and where a regulatory gap has persisted since 2021.

What Southeast Employers Should Do Before the Rule Is Finalized

The proposed rulemaking will go through a public comment period before any final rule takes effect. That process typically takes several months to over a year. In the meantime, businesses that use staffing firms, contract labor, or multi-employer job sites are operating under the existing case-by-case standard.

Here are the most important steps for employers to take right now:

- Review all current staffing agency and contractor agreements to understand the degree of control each party has over work schedules, supervision, hiring, and discipline
- Identify any workers who perform services for your business but are technically employed by another entity, and assess whether your day-to-day oversight of those workers could establish joint employer status
- Confirm that any staffing agency or contractor you use maintains proper payroll compliance, workers compensation coverage, and correct classification of their workers
- If you operate in multiple Southeast states, note that some state courts apply broader joint employer tests than the federal standard

For businesses using HR outsourcing or PEO services, many of these risks are already managed through the co-employment structure. A professional employer organization serves as the employer of record for payroll and compliance purposes, which means your benefit and payroll obligations run through the PEO rather than directly through a patchwork of contractor arrangements.

The DOL has not yet published the formal notice of proposed rulemaking. Businesses should watch for that announcement and consider submitting comments or working with HR consulting or legal counsel to review current arrangements before the rule takes effect.

This week, pull up your active staffing agency and contractor agreements and ask one question: who controls the daily work of the people doing work for your business? If the honest answer includes multiple parties, it is worth a formal review before the new joint employer rule arrives.

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