Using a Staffing Agency or Franchise Model? A New Federal Proposal Could Change Who's Liable
A lot of Wisconsin businesses rely on outside labor without thinking of it that way: a staffing agency for seasonal manufacturing help, a franchise structure, a subcontractor relationship on a project. A new federal proposal is asking a question that matters to all of them: whose responsibility is that worker's wage and hour compliance, really?
What the Proposal Does
In April 2026, the Department of Labor's Wage and Hour Division issued a proposal to clarify “joint employer” status under three federal laws at once: the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. The proposal lays out a multi-factor analysis that looks at how much control a business actually exercises over workers supplied through a contractor, franchisee, or staffing arrangement.
Joint employer status matters because it determines who can be held responsible when something goes wrong. If your business is found to be a joint employer of workers technically on a staffing agency's payroll, you can share liability for wage and hour violations, missed overtime, and FMLA obligations, even if you never processed their paycheck.
Who This Actually Affects
This is most relevant to businesses that regularly use staffing agencies to fill seasonal or fluctuating labor needs, franchise operations where a parent brand exercises meaningful control over local operations, and companies that rely on subcontractors for ongoing, not just project-based, work. If your business fits any of those descriptions, the degree of control you exercise over that outside labor is about to matter more, not less.
Why This Is Worth Watching Now, Not Later
The proposal is not final. It is still in the rulemaking process. But the direction is clear enough to act on: businesses that treat staffing agency workers, franchisees, or subcontractors as entirely someone else's responsibility should take a closer look at how much day-to-day control they actually exercise over those workers. Setting schedules, directing tasks, controlling how work gets done, and handling discipline are all signals that point toward joint employer status, regardless of who technically issues the paycheck.
What to Do With This Now
If your business uses any of these arrangements, it is worth documenting where the lines actually sit: who sets schedules, who trains the workers, who has authority over discipline, and who controls the day-to-day work. That documentation will matter regardless of how this specific rule turns out, because the underlying legal question, how much control does your business actually have, does not go away even if this particular proposal changes shape before it is finalized.
This article is part of our HR Support & Insights for Wisconsin Businesses resource hub.
