The U.S. Department of Labor (DOL) recently released the text of a proposed rule that would establish a nationwide standard for determining joint liability for employees under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act.

There has been no DOL regulation on a nationwide joint employer standard since the one issued during the first Trump administration in 2020 that was later withdrawn by the Biden administration in 2021. The 2020 rule was substantially vacated by a federal district court prior to its withdrawal.

The Fair Labor Standards Act governs minimum wage, overtime, and the employment of minors and is most applicable to the construction industry. The Family and Medical Leave Act governs workers’ eligibility for job-protected leave for medical and family reasons and the Migrant and Seasonal Agricultural Worker Protection Act establishes housing, wage, and other standards for farm workers.

Like the 2020 rule, this week’s proposed rule identifies four factors that demonstrate whether a business that benefits from the work of another businesses’ workers has sufficient control over those workers and that the two businesses are jointly liable under the statutes.

But unlike the 2020 rule, the recently proposed rule does not require that a business actually exercise one or more of the types of control described in the factors for a finding of joint employer status. Instead, the rule establishes that the actual exercise of control is more important to a determination of joint employer status than an employer’s reserved right to exercise such control.

In vacating the 2020 rule, the court found that the rule’s requirement for a business’ actual exercise of control was not consistent with case law. The administration also said in an announcement that the change would bring much-needed nuance to the test to determine joint employer status.

While courts are the final authorities on the meaning of the statutes the proposed rule interprets, the proposed rule would guide DOL’s enforcement actions. DOL anticipates that courts will afford a nationwide joint employer regulation some deference in joint employer cases, since the regulation will have been subjected to public scrutiny under the notice and comment requirements of the Administrative Procedure Act.

NAHB will continue to monitor DOL’s rulemaking process and provide formal comments on the proposed rule.