Good morning. There is a rule sitting at the Department of Labor that names general contractors and subcontractors by title, and almost nobody in the trades has read it. It is still only a proposal — which is exactly why now is the useful time to understand it. Here is what it would do, and the part that is genuinely good news.
Top story — Two different questions, and most owners only worry about one
The question you already ask is whether the guy you call a subcontractor is actually an employee. That is classification, and The Callout has covered it.
Joint employment is the other question, and it is the more expensive one: your sub is unquestionably a business, his crew are unquestionably his employees — and the government asks whether they are also yours. If the answer is yes, you are on the hook with him, jointly and severally, for their minimum wage and overtime under the Fair Labor Standards Act, and their hours on your job may have to be combined with their hours elsewhere for overtime purposes.
In April the Wage and Hour Division proposed a rule to define that test: "Joint Employer Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act" (91 FR 21878). It is 45 pages, it is flagged as significant, and it proposes new sections at 29 CFR 791.100–791.130.
The proposed vertical test — the one that covers a general contractor above a sub — is four factors: whether the potential joint employer "(1) Hires or fires the employee; (2) Supervises and controls the employee's work schedule or conditions of employment to a substantial degree; (3) Determines the employee's rate and method of payment; and (4) Maintains the employee's employment records." The proposal adds that "No single factor is dispositive."
Two refinements decide most real cases. On reserved rights, the proposal says the ability or "reserved right to act" is "relevant for determining joint employer status, but the potential joint employer's actual exercise of control is more relevant than such ability, power, or right." On indirect control, it is exercised "through mandatory directions to another employer that controls the employee" — and a sub's voluntary decision to grant your request, recommendation or suggestion "does not constitute indirect control."
DOL is explicit about who this lands on. The preamble names construction alongside restaurants and hotels as a sector "that may be more affected by this proposed rule than others," and describes the vertical scenario as centering on "contractors and subcontractors or staffing agencies and their clients."
Quick hits
There is a safe harbor list, and it is the most useful page in the document. Proposed §791.125 says a set of ordinary business practices do not make joint employer status more or less likely: operating as a franchisor or under a similar business model; requiring a contractor to comply with legal obligations or health-and-safety standards — expressly including FLSA-compliance clauses, anti-harassment policies, background checks, workplace safety protocols and safety training, and the monitoring and enforcement of those clauses; imposing quality-control standards, including specifying the size or scope of work and requiring quantity, quality and deadline standards; providing a sample handbook or forms; offering an association health or retirement plan; and jointly participating in an apprenticeship program. In plain terms: making your subs run safe, insured and to spec is not what gets you caught.
What gets you caught is running his people. The proposal's own worked examples draw the line. An office park that holds a contractual right to supervise a janitorial contractor's staff but never uses it is not a joint employer. A company that closely supervises staffing-agency workers and controls their hours is. The same company taking agency workers under limited supervision, where the agency sets pay and schedules, is not. Daily task assignment plus timekeeping plus real influence over who stays and who goes is the combination that flips it.
Right now there is no rule at all — and the labor board is pointing the other way. 29 CFR part 791 currently reads, in full, "Part 791 [Reserved]." There has been no generally applicable FLSA joint-employer regulation since the 2021 rescission, which is the gap this proposal is meant to fill. Meanwhile the National Labor Relations Board went in the opposite direction: after a Texas federal court vacated its 2023 standard, the Board published a final rule effective 27 February 2026 replacing the vacated text with its 2020 standard, which requires an entity to "possess and exercise … substantial direct and immediate control" over essential terms of employment. So a contractor can face a broader test for wage-and-hour purposes and a narrower one for labor-relations purposes, at the same time, on the same crew. DOL says so itself: the proposal "has no effect on the National Labor Relations Act."
Proposed is not passed. The comment period opened 23 April and closed 22 June 2026. As of this writing no final rule has been published, there is no effective date, and the proposal has not been withdrawn. Nothing in it binds anyone yet. It is also not a straight revival of the 2020 rule — DOL dropped several of that rule's limits, including its requirement that control be actually exercised, saying it did so to improve the rule's legal defensibility. Translation: this version is written to survive a court challenge the last one did not.
The Tip — Audit the four factors, not your paperwork
Your subcontract agreement is not the exposure. What your superintendent does every morning is. Take your three biggest subs and walk the four factors honestly. Who tells their crew what time to start, and who signs off when they leave? Who decides which of their people come back tomorrow? Does anyone in your office keep their hours, their certifications or their personnel records? Has anyone on your staff ever told a sub to get rid of a specific worker? Three yeses on one sub is a conversation to have with an employment attorney, not a filing problem.
Then fix the cheap ones. Route every crew-level instruction through the sub's foreman rather than direct to his workers. Keep timekeeping for a sub's crew out of your system unless you have a contractual reason for it that you can articulate. Put safety and compliance requirements in writing as standards, not as supervision — the proposal protects standards explicitly. And when you want a particular worker off the job, say why the work is unacceptable and let the sub decide who does it, because a voluntary decision by the sub is expressly not indirect control while a mandatory direction is.
Tool watch — [Not sponsored]
Regulations.gov is free and searchable, and it holds the full docket for this rule — WHD-2026-0067 — including every comment filed by contractors and trade associations. Reading three or four comments from firms your size is the fastest way to understand what this rule actually does to an operating business, because the commenters are arguing about their own payrolls rather than about theory. The docket also tells you the moment a final rule posts, which is the only date that will matter.
That's the callout. See you next time.
The Callout — the business brief for the trades. We label every commercial placement: [Sponsor], [Affiliate], or [Not sponsored]. Today's Tool watch is our own honest read — no one paid for it. 231J Ramparts Road, Te Anau 9600, New Zealand · Unsubscribe anytime. Nothing in The Callout is legal advice. Joint employment turns on your specific facts — talk to an employment attorney before changing how you run a job.
Sources: Federal Register — Joint Employer Status Under the FLSA, FMLA and MSPA, proposed rule (91 FR 21878, 23 Apr 2026) · DOL Wage and Hour Division — NPRM landing page and Questions and Answers · Regulations.gov — docket WHD-2026-0067 · eCFR — 29 CFR Part 791 [Reserved] · Federal Register — NLRB, Withdrawal of 2023 Standard for Determining Joint Employer Status (91 FR 9707, eff. 27 Feb 2026) · eCFR — 29 CFR 103.40, the NLRB standard now in force