Most small business owners who use a staffing agency assume one thing: the staffing agency handles the workers. You just get the labor.
The Department of Labor wants to clarify when that assumption is legally wrong.
On April 22, 2026, the DOL proposed a new rule that would establish a single nationwide standard for determining "joint employer" status - which is the legal question of when two separate businesses are both on the hook for a worker's wages, overtime, and labor protections.
The comment period closes June 22, 2026. That's 24 days from today.
What "Joint Employer" Actually Means - and Why It Matters
Under federal wage law, if two businesses are considered "joint employers" of the same worker, both businesses are jointly and severally liable for any violations. That phrase - jointly and severally - is the part you need to understand.
It means: if the staffing agency underpays a worker, or fails to pay overtime, and a court finds that your business was also that worker's joint employer, you're on the hook too. Not just the staffing agency. You.
The same goes for subcontractors. If you're a general contractor who uses subcontractors, and those subs pay workers below minimum wage, the joint employer question determines whether your business shares that liability.
Think of it like co-signing a loan. If the primary borrower stops paying, the bank comes to you.
What the Proposed Rule Actually Changes
The DOL's new proposal introduces a four-factor test to determine "vertical joint employment" - which is the staffing and subcontracting scenario most relevant to small businesses.
Under the test, you may be considered a joint employer if your business:
- Has authority to hire or fire the worker
- Exercises substantial control over work schedules or conditions
- Determines the worker's rate or method of pay
- Maintains employment records for the worker
The word "substantial" is doing a lot of work here. The DOL proposal focuses on actual control over employment terms - not just theoretical control. Simply supervising when and how a contractor shows up to do their job does not automatically make you a joint employer.
Importantly, the proposal also says that ordinary commercial relationships - vendor relationships, franchise arrangements, shared service providers - do not automatically create joint employer status on their own.
The proposal is widely viewed as more employer-friendly than the broader standards pushed during the Obama and Biden administrations. The Trump administration's DOL framed it as reducing litigation risk while maintaining worker protections.
The SBA's Roundtable Just Happened - and the Door Is Still Open
Yesterday - May 28 - the SBA's Office of Advocacy hosted a virtual Small Business Labor Roundtable specifically to gather feedback from small businesses about this proposed rule.
The roundtable is closed, but the formal comment period is not. That's the venue where your input actually influences the final rule.
You submit comments at regulations.gov - search for "Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act." Any comment you submit becomes part of the public record the DOL must consider before finalizing the rule.
The SBA Office of Advocacy explicitly exists to represent small business interests in the federal regulatory process. Their role is to ensure the DOL considers the downstream impact on small businesses - and they are actively collecting input right now.
Who Should Pay the Most Attention
The proposed rule affects any business model where you direct workers you don't directly employ. That includes:
- Construction and trade businesses that use subcontractors on job sites
- Retail and restaurant franchisees with shared staffing arrangements
- Agricultural operations that use labor contractors or crew bosses
- Light manufacturing or fulfillment businesses that use temp agencies for floor workers
- Professional service firms that use independent contractors on client engagements
The higher your day-to-day control over how contract workers do their jobs, the more this rule is worth reading carefully.
What to Do Right Now
This rule is still a proposal - not law. But "proposed" doesn't mean irrelevant. The final rule will be shaped by the comments the DOL receives.
Three steps:
1. Assess your staffing relationships. Do you have practical control over when, how, and at what rate workers employed by a third party show up for you? If yes, get legal counsel to review your exposure under the proposed test.
2. Read the proposal. The DOL's official summary is available at dol.gov/agencies/whd/nprm-joint-employer-status-under-flsa-fmla-mspa. It is long, but the four-factor test section is readable in 15 minutes.
3. Submit a comment if you have a view. Deadline: June 22, 2026. The comment window closes at 11:59 PM ET. You don't need a lawyer to write a comment - plain language about how this rule would affect your specific business model is exactly what the DOL is supposed to consider.
The Bottom Line
If you use staffing agencies, subcontractors, or temp workers, this rule determines the boundaries of your legal exposure for their wages and labor violations. The proposed standard is more employer-friendly than recent alternatives. But "more employer-friendly" still means you need to know where the lines are.
You have 24 days to say something.
Source reading: DOL Wage and Hour Division - Official Proposed Rule (April 22, 2026) - IECI.org analysis of contractor and construction implications - SBA Office of Advocacy - Small Business Labor Roundtable announcement - Stinson LLP employer-facing analysis
Sam Torres covers policy and regulatory news for The Useful Daily.