Labor Dept. Liability Shift

The U.S. Labor Department has proposed a rule that would make it harder to treat a brand owner or lead company as responsible for wage violations by contractors or franchisees. (federalregister.gov) The proposal was published April 23 by the Wage and Hour Division and would set one federal test for joint-employer questions under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. Public comments are due by June 22, 2026. (federalregister.gov) In plain terms, joint-employer rules decide when two businesses count as the same boss for legal purposes. If a staffing firm, farm labor contractor, or franchise operator underpays workers, the question is whether the larger company that benefits from the work can also be on the hook. (federalregister.gov) The Labor Department said it has lacked regulatory guidance on Fair Labor Standards Act joint employment since 2021 and wants a “nationwide standard” for investigators. The agency said federal and state authorities have used “widely varying tests and standards” in the meantime. (federalregister.gov) The move points back toward the Trump administration’s earlier approach. In April 2019, the department proposed a joint-employer rule aimed at promoting “certainty,” reducing litigation, and narrowing when one company could be liable for another company’s wage-law violations. (federalregister.gov) The new proposal arrives as federal labor policy has been pulling in different directions on worker leverage and employer control. The Federal Trade Commission adopted a national noncompete ban in April 2024, but a Texas federal court blocked it on August 20, 2024, and the commission later moved to dismiss its appeal on September 5, 2025. (ftc.gov 1) (ftc.gov 2) Joint-employer standards have also split across agencies. The National Labor Relations Board’s broader 2023 rule was held up in court, and the board says its 2020 standard remains in effect after a federal judge vacated the newer version on March 8, 2024. (nlrb.gov) (akingump.com) For companies that use franchise, subcontracting, and staffing models, the Labor Department’s proposal would lower the odds that a larger firm is treated as the legal employer for pay claims. For workers, the comment period that ends June 22 is the next chance to try to change where that liability line is drawn. (federalregister.gov)