The U.S. Department of Labor has issued a proposed rule on "joint employment," reopening one of the most contested questions in wage-and-hour compliance: when two businesses can both be held responsible as an employee's employer under the Fair Labor Standards Act.

The announcement comes from the law firm Crowell & Moring, which flagged the proposal in a client alert. For HR leaders, the practical stakes are familiar ones — staffing arrangements, franchise structures, subcontracting, and contingent-workforce programs all turn on how broadly or narrowly the department defines joint employment.

A brief recap of why this matters. The FLSA requires covered employers to pay at least the federal minimum wage and overtime. When a worker is jointly employed — for example, by a staffing agency and a client company, or a franchisor and a franchisee — both entities can face liability for wage violations, back pay, and liquidated damages. The question of who counts as a joint employer has shifted repeatedly across administrations, leaving employers to re-underwrite their vendor and partner relationships each time the test changes.

Earlier frameworks moved between a relatively expansive interpretation, under which indirect control over work could create joint-employer status, and narrower readings keyed to more direct control over hiring, firing, pay, and supervision. Each revision forced HR and procurement teams to revisit contracts, indemnification clauses, audit rights, and on-site supervision models.

Because the department has released this as a proposed rule rather than a final one, the text now heads into the federal rulemaking process. That typically means publication in the Federal Register, a public comment period, and review of submitted comments before any final rule takes effect. Employers who rely on staffing agencies, labor contractors, or franchise structures have a window to submit comments and should treat that window as a compliance planning opportunity, not a formality.

For people-process decisions, the proposal touches several concrete areas:

Contingent and staffing arrangements. Companies using agency or temporary workers should reassess which party sets schedules, controls day-to-day supervision, determines pay rates, and handles discipline. Those control factors typically drive joint-employer findings.

Contract language. Staffing agreements, subcontract clauses, and franchise documents allocate wage-and-hour responsibility and indemnification. A changed regulatory test can make existing allocations obsolete.

Audit exposure. If joint employment applies, both entities can be on the hook for FLSA violations attributed to either. Payroll classification, overtime tracking, and hours-worked records take on shared significance across organizational boundaries.

Multi-state operations. The federal test sets a floor; several states apply their own joint-employment or joint-liability standards. A federal revision does not erase state-level exposure.

Crowell & Moring's alert signals that employers should watch the docket for the proposal's specifics — the exact test the department proposes to apply, any examples it includes for staffing and franchise scenarios, and the effective date it contemplates for a final rule. Until a final rule publishes, the currently operative standard governs enforcement, and employers should document their compliance posture against that standard while preparing for the proposed direction.

The next concrete milestone will be the close of the comment period and any departmental response; HR and legal teams staffing contractor-heavy models will want to weigh in before that deadline passes.