Joint Employer Rule Construction: What ABC Ohio Valley Contractors Need to Know About the New DOL Proposal
On April 22, 2026, the U.S. Department of Labor proposed sweeping changes to the evaluation of construction contractors, staffing agencies, and related entities as joint employers. The proposed rule clarifies that certain business relationships, such as sharing vendors or being franchisees, are not alone sufficient to establish joint employment (Joint employment occurs when two or more employers share legal responsibility for the same employee, meaning each employer is jointly and severally responsible for ensuring that the employee receives all benefits and protections owed under the law.).
This guide is intended for merit shop general contractors, subcontractors, and HR directors operating in the Dayton-Cincinnati-Northern Kentucky corridor. Understanding these changes is critical for managing liability and workforce strategies in the evolving regulatory landscape.
For merit shop general contractors, subcontractors, and HR directors operating across the Dayton-Cincinnati-Northern Kentucky corridor, this proposed rule could fundamentally reshape liability exposure and workforce management strategies.
Key Takeaways
On April 22, 2026, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking (NPRM) to create a single, nationwide standard for determining joint employer status under the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA), and Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The proposal closely tracks—but revises—the 2020 Trump-era rule that was struck down in federal courts.
- The proposed rule clarifies vertical joint employment (typical GC-subcontractor and host-staffing relationships on Ohio Valley commercial projects) and horizontal joint employment (related or commonly owned entities sharing workers).
- Joint employers can be deemed jointly and severally liable for unpaid wages, overtime, liquidated damages, and certain FMLA and MSPA obligations, sharing legal responsibility for compliance under federal employment laws. Under the proposed rule, entities may be deemed joint employers based on the standards and factors outlined by the DOL, which increases risk for merit shop contractors.
- ABC Ohio Valley members should immediately review subcontractor prequalification, staffing agreements, and HR practices to manage joint-employer exposure before the rule is finalized.
- Contractors can submit comments to the DOL within the 60-day comment window through the ABC Action App and should consult ABC Ohio Valley’s network of construction labor attorneys for project-specific advice.
DOL’s New Joint Employer Proposal: Overview and Timing
The proposed rule by the U.S. Department of Labor aims to create a single, nationwide standard for determining joint employer status under the FLSA, FMLA, and MSPA, addressing longstanding ambiguity and establishing a uniform national standard. The department intends to resolve circuit-court splits that have left multi-state contractors facing different tests depending on where their projects are located.
- The NPRM was published in the Federal Register shortly after announcement, with comments on the proposed rule due by June 22, 2026
The DOL states it is drawing on common elements from federal appellate court decisions to create regulatory guidance that applies consistently across jurisdictions. In doing so, the DOL is considering common-law standards traditionally used by courts to define employment relationships, rather than relying solely on statutory or regulatory tests. This matters for ABC Ohio Valley members because the rule would bind not only traditional employers but also general contractors, subcontractors, staffing firms, and even property owners who share control over workers.
Standards for determining joint employment have shifted between broad and narrow interpretations over recent years. The DOL is explicitly attempting to realign its regulations after rescinding the 2020 joint-employer rule in 2021, which left a regulatory gap, with case law in the Sixth Circuit (covering Ohio and Kentucky) and Seventh Circuit (covering parts of Indiana) filling it.
From the 2020 Joint-Employer Rule to the 2026 Proposal
The 2026 proposal shares structural similarities with the 2020 joint-employer regulations issued under the Trump administration, but the DOL has addressed the specific legal deficiencies that caused federal courts to strike down the earlier rule.
- The 2020 rule focused heavily on “actual” and direct control over four core factors: hiring/firing, supervision and scheduling, pay setting, and recordkeeping in vertical joint-employment scenarios
In New York v. Scalia (S.D.N.Y. 2020), a district court vacated the vertical joint-employment portion of the 2020 rule, finding it inconsistent with the text and remedial purpose of the Fair Labor Standards Act and arbitrary under the Administrative Procedure Act. This decision left employers without clear regulations.
The 2026 proposal keeps the four-factor economic reality test but makes critical changes:
| 2020 Rule | 2026 Proposed Rule |
|---|---|
| Required “actual” direct control | Includes direct or indirect control |
| Exclusive four-factor test | Allows additional factors like economic dependence |
| FLSA regulations only | Harmonizes FLSA, FMLA and MSPA definitions |
| Unanimous factors required | Substantial likelihood standard |
Unlike the 2020 rule, the new proposal explicitly harmonizes definitions across all three federal employment laws, giving contractors a single regulatory roadmap.
Vertical Joint Employment in Construction: GC-Subcontractor and Staffing Relationships
(Vertical joint employment occurs when an employee is jointly employed by two or more employers that simultaneously benefit from the employee’s work, such as in staffing agency arrangements or general contractor/subcontractor relationships.)
Vertical joint employment occurs when an employee is jointly employed by two or more employers that simultaneously benefit from the employee’s work, such as in staffing agency arrangements or general contractor/subcontractor relationships. Joint employment analysis considers the extent to which employers share control over the employee’s work, making this the most critical concept for ABC Ohio Valley members because it addresses stacked employment relationships common on commercial job sites.
The NPRM proposes to implement a four-factor analysis for vertical joint employment, focusing on whether the potential joint employer hires or fires the employee, supervises or controls the employee’s work, determines the employee’s pay, and maintains employment records.
The NPRM proposes to implement a four-factor analysis for vertical joint employment:
- Hiring/Firing: Who can hire or fire a worker, including veto power over personnel decisions
- Supervision/Scheduling: Who supervises the day-to-day work and controls the employee’s work schedule
- Pay Determination: Who determines the employee’s rate and method of payment
- Records: Who maintains the employee’s employment records and payroll records
Importantly, indirect control now counts under the proposed rule. For projects along the Dayton-Cincinnati-Northern Kentucky I-75/I-71 corridor, a merit shop GC could become a potential joint employer of a subcontractor’s crew if it effectively controls these factors—even if the subcontractor remains the “direct” employer on paper.
The proposed rule clarifies that common business practices like imposing project safety requirements, mandating site orientation, and requiring schedule adherence alone do not automatically establish joint employment. Risk increases substantially when:
- GC field supervision directly disciplines subcontractor employees
- GC sets individual pay rates or approves timecards
- GC decides which individuals are assigned or removed from projects
Joint employment is more likely when employers share control over essential aspects of the employee’s work and employment conditions.
Host contractors using staffing agencies for supplemental labor on industrial turnarounds or hospital projects should examine whether site managers are functioning more like supervisors of the staffing agency’s employees than customers of a service.
Horizontal Joint Employment: Common Ownership and Related Construction Entities
(Horizontal joint employment exists when an employee works separate hours for two or more employers in the same workweek, and the question is whether the employers are sufficiently associated with respect to the employment of the employee to be deemed joint employers.)
Horizontal joint employment exists when two or more employers are sufficiently associated with respect to the employment of the same employee, such as when an employee works separate hours for multiple employers in the same workweek. This affects family-owned construction enterprises common throughout the Ohio Valley.
Under the proposed rule, horizontal joint employment analysis focuses on whether two or more entities:
- Share the same employee’s services
- Pursue the same business purpose
- Share common management or ownership
- Coordinate control over essential employment terms
Many ABC Ohio Valley members operate multiple entities—a commercial GC, a separate electrical subsidiary, and an equipment leasing company. When these entities rotate the same foreman between companies on overlapping schedules, horizontal joint employer analysis applies.
If entities under common ownership share HR, payroll systems, supervisors, and maintain health benefits through common plans while presenting as a single operation, the DOL may treat them as horizontal joint employers. Joint employment ensures that hours worked across multiple related entities are aggregated for overtime purposes under the FLSA.
Contractors should map their corporate structure, shared service arrangements, and cross-company staffing patterns. While the proposed rule provides examples from agriculture and hospitality, the same logic applies to construction holding companies and affiliated specialty trades in the Cincinnati-Northern Kentucky region. However, merely being franchisees of the same franchisor or sharing vendors does not automatically make entities joint employers, as they may still be considered separate employers.
Consequences Under FLSA, FMLA, and MSPA for Ohio Valley Contractors
While the proposed rule establishes a unified joint-employer standard, the consequences vary by statute. The following table summarizes the key consequences under each statute:
| Statute | Consequences for Joint Employers |
|---|---|
| FLSA | Joint employers are jointly and severally liable for any wages, damages, and relief owed to an employee. The total number of hours worked by the employee for all joint employers is used to determine overtime pay entitlement. For example, if a worker logs 25 hours for one employer and 20 for another in the same workweek, both entities may owe overtime for the 5 hours that exceed 40. |
| FMLA | An employee who is jointly employed must be counted by all joint employers in determining coverage and eligibility. Only the primary employer is responsible for providing required notices and maintaining health benefits, but the secondary employer may be obligated to provide job restoration. For construction, this affects how GCs must treat a subcontractor’s long-term onsite superintendent who goes out on medical leave after working exclusively under GC direction. |
| MSPA | Each joint employer under the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) must ensure timely disclosure of employment terms and payment of wages when due. While many commercial contractors don’t employ seasonal agricultural workers, specialty contractors that support grain facilities or food processing plants may face these obligations. |
A joint employer finding can expand back-pay periods and increase exposure in DOL audits. The DOL recovered $236 million in FLSA back wages in FY2024, underscoring the financial stakes for ABC Ohio Valley members.
Risk Management on Commercial Projects: Prequalification, Contracts, and HR Practices
Construction executives in the Ohio Valley can reduce—but not eliminate—joint-employer risk by tightening prequalification, subcontract agreements, and everyday HR practices. The joint employer rule serves as a safeguard for labor rights in complex subcontracting chains, making proper documentation essential.
Subcontractor Prequalification
- Vet wage-and-hour compliance history before award
- Verify independent safety programs and payroll capacity
- Confirm proper worker classification (employee vs. independent contractor), including evaluating whether workers possess managerial skills that allow them to influence their opportunity for profit or loss
- Review through ABC Ohio Valley’s recommended best practices
Contract Language
- Require subcontractors and staffing agencies to comply with wage and hour laws
- Mandate maintenance of accurate time records and supply agreements for documentation
- Include indemnification and defense obligations for wage violations
- Require sufficient employment practices and wage-and-hour insurance
Field Supervision Boundaries
- Instruct GC superintendents not to hire, fire, discipline, or set pay for subcontractor employees
- Route all performance issues through the subcontractor’s designated supervisor
- Document that safety enforcement does not constitute personnel management
Payroll Documentation
- Each employer maintains separate time records
- Avoid shared punch systems without clear employer attribution
- Require staffing agencies and subcontractors to keep auditable, contemporaneous records
HR Training
- Train project managers, HR directors, and site supervisors on the new joint employer analysis to ensure compliance while enforcing jobsite safety and quality standards without stepping into direct personnel control
ABC Ohio Valley provides sample contract language, policy templates, and access to construction labor attorneys who can tailor these tools to your specific project delivery models.
ABC Ohio Valley Advocacy and Member Action Plan
ABC Ohio Valley coordinates with ABC National to respond to major federal rulemakings affecting merit shop contractors. The reinstated joint-employer standard is viewed as industry-friendly, reducing the risk that general contractors will be held responsible for subcontractor labor violations—but the proposed rule could shift this balance.
ABC at the national level is preparing formal comments focusing on impacts to merit shop contractors, project delivery efficiency, and apprenticeship programs that rely on flexible subcontracting and staffing arrangements.
Member Action Items:
- Track the rulemaking timeline through ABC communications
- Submit comments via the ABC Action App before June 22, 2026
- Attend ABC briefings or webinars on joint employment
- Update internal risk assessments with HR and legal advisors
- Review related regulatory issues at ABC Legislative Conference 2026 and Construction Prevailing Wage in 2026
ABC Ohio Valley’s professional services network includes vetted construction and labor attorneys who can analyze your multi-entity structures, subcontract templates, and staffing models under the proposed joint employer rule.
Call to Action for Construction Executives in the Ohio Valley
The joint employer proposal isn’t abstract legal theory—it’s a direct business risk affecting bidding, subcontracting strategy, and labor cost structures for GCs, subs, and suppliers in Ohio, Kentucky, and Southeastern Indiana.
- Review immediately: Examine existing subcontract forms, master service agreements with staffing agencies, and intercompany service arrangements to identify language increasing joint-employer exposure
- Connect with counsel: Contact ABC Ohio Valley to be matched with experienced construction labor attorneys from our professional services network for a tailored contract and policy review
- Submit comments: Use ABC’s Action App before June 22, 2026, to provide practical feedback from contractors in the Dayton-Cincinnati-Northern Kentucky corridor
ABC Ohio Valley remains committed to helping members navigate joint-employer risk through advocacy, education, and access to trusted professional advisors. Your voice matters in shaping how federal courts and agencies apply these standards to real-world construction practices.
Frequently Asked Questions
Does enforcing strict safety rules on my jobsite make my company a joint employer?
Under the proposed rule, common business practices such as enforcing OSHA-compliant safety policies, requiring PPE, providing safety orientations, and stopping unsafe work typically do not, by themselves, create joint employer status. Risk increases when safety oversight becomes direct personnel management—for example, disciplining or removing specific subcontractor employees rather than directing the subcontractor’s supervisor to take action. Maintain robust safety programs while channeling corrective actions through subcontractor management to balance legal compliance with risk management.
How should I handle a long-term staffing agency worker who functions like part of my core crew?
When a staffing agency employee works exclusively at one site for an extended period, follows the host’s schedules, and is supervised day-to-day by host supervisors, the DOL is more likely to view the host as a vertical joint employer. Clearly document the staffing agency’s responsibility for hiring, firing, pay decisions, and formal discipline. Consider whether certain key roles should be converted to direct employment to simplify compliance, and review these arrangements with legal counsel to evaluate wage, overtime, and FMLA implications.
What if my affiliated companies share employees but use separate payrolls?
Separate payrolls and tax IDs alone will not prevent a horizontal joint employer relationship if affiliated companies share ownership, management, HR systems, and workers while operating as a single integrated business. If an employee works separate hours for two or more employers in the same workweek, those hours may need to be aggregated for overtime purposes. Consult counsel to determine whether to treat entities as joint employers for payroll and recordkeeping or adjust assignments to minimize ambiguity.
Will the proposed rule change how unions or the NLRB treat joint employment on my projects?
The DOL’s proposal governs joint employment under FLSA, FMLA, and MSPA, while the National Labor Relations Board applies its own standard under the National Labor Relations Act. As of March 2026, the NLRB has reinstated its 2020 standard requiring a company to exercise substantial direct and immediate control over a worker to be a joint employer. Although some concepts overlap, the NLRB and DOL rules remain distinct—a joint-employer finding under one statute does not automatically dictate the result under the other. Employers must consider that other agencies may apply different tests for joint employment. Joint employer status also makes it easier for unions to organize workers across multiple subcontractors on a single site, adding another layer of risk for merit shop contractors in monitoring unfair labor practice claims.
What is the most important step I can take this quarter to prepare for the rule?
The single most impactful step is conducting a focused joint-employer risk review of subcontract agreements, staffing contracts, and intercompany arrangements with help from construction labor counsel available through ABC Ohio Valley. Prioritize high-volume subcontractors, long-term staffing relationships, and entities that frequently share workers. Update contract clauses, site supervision policies, and timekeeping procedures based on this review, and submit comments through the ABC Action App to help shape the final standard around realistic construction practices.
