Labor Department proposes joint employer rule for restaurants, wages and leave obligations

A cook who misses overtime after a brutal Friday rush may soon have a clearer path to name more than one employer if the people running the store, the franchise, and payroll all helped control the job. The Labor Department’s new joint-employer proposal, announced April 22 and posted in the Federal Register on April 23, would set a nationwide standard for who can be held responsible for wages, damages, leave, and other labor obligations. Public comments run for 60 days and close at 11:59 p.m. EDT on June 22.

For restaurant workers, the stakes are not abstract. In a franchised dining room, the manager who posts the schedule may work for one company, the payroll system may sit with another, and the brand on the sign may still shape day-to-day operations. Under the proposal, the question is whether those businesses actually share control. If they do, they could be jointly and severally liable for unpaid wages, overtime, or leave violations, meaning a worker could pursue more than one entity when a paycheck or protected absence goes wrong.

The Labor Department would apply the same basic analysis across the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. For vertical joint employment, the agency’s four-factor test asks whether the putative joint employer hires or fires the worker, supervises and controls the work schedule or conditions of employment to a substantial degree, determines the rate and method of pay, and maintains employment records. The department says reserved control can matter, but exercised control matters more. For horizontal cases, separate employers must be sufficiently associated with respect to the same worker, but sharing a vendor or being franchisees of the same franchisor would not, by itself, make them joint employers.

The proposal comes after years of churn. The Labor Department says no federal regulatory guidance on FLSA joint-employer status has existed since 2021. A narrower 2020 rule was struck down in part by a federal judge in New York that September, then rescinded in 2021, with that rescission taking effect on September 28, 2021. The new proposal is meant to restore regulatory guidance and line up the FLSA with the FMLA and MSPA, while also reflecting a narrower federal view that has resurfaced elsewhere, including a February 2026 National Labor Relations Board change under labor law.

Restaurant groups say clearer lines matter because the industry runs on franchise systems. The National Restaurant Association says small business owners operate nearly a quarter of a million franchised restaurants and employ more than four million people. The International Franchise Association says franchising includes 832,000 businesses, nearly 8.8 million direct jobs, and $907.3 billion in economic output. For hourly workers, the real question is simple: when the schedule, the paycheck, or a leave request goes wrong, which company actually has to fix it.