Will the DOL's softened joint employer rule create new compliance risks for HR tech companies?

The new rule looks to sidestep the criticisms of the first Trump administration's rule, attorneys told HR Dive. The question is: Does it do enough?

What Happened

The Department of Labor proposed a new joint employer rule that revives elements of the Trump administration's 2020 regulation while addressing court criticisms. The rule maintains a four-factor test for determining joint employment relationships but softens requirements by allowing additional factors beyond the core criteria. Unlike the original rule that required direct control proof, this version establishes "substantial likelihood" thresholds when all four factors align unanimously.

Why This Matters for HR Tech Leaders

HR technology companies face heightened compliance complexity as the rule creates gray areas in client relationships. Your platforms that integrate with staffing agencies, manage engagement workflows, or provide workforce management tools could trigger joint employer liability. The softened language means courts will evaluate relationships case-by-case rather than applying rigid standards. With the Supreme Court's 2024 Loper Bright decision eliminating Chevron deference, agencies receive less judicial protection for their interpretations, making outcomes less predictable.

The Starr Conspiracy's Take

This regulatory shift demands proactive relationship auditing for HR tech companies. The four-factor test, hiring/firing authority, work supervision, payment determination, and record maintenance, directly impacts how you structure client partnerships and platform capabilities. Companies should evaluate whether their software enables clients to exercise substantial control over workers, potentially creating joint employer exposure. Understanding the compliance buyer's journey becomes critical as legal teams increasingly drive technology decisions. The 60-day comment period through June 22 offers an opportunity to influence the final rule's language.

What to Watch Next

Monitor stakeholder comments through the June 22 deadline and subsequent final rule publication. Court challenges will likely emerge within months of implementation, creating case law that clarifies enforcement boundaries. Track how competitors adjust their client agreements and platform features in response.

Related Questions

How should HR tech companies adjust client engagements under the new rule?

Review agreements with staffing agencies and clients to limit control-related language. Clearly define your role as a technology provider rather than an employment decision-maker. Consider adding indemnification clauses for joint employer liability.

What platform features could trigger joint employer status?

Workforce scheduling tools, performance management systems, and payroll integrations that give clients substantial control over workers present the highest risk. Understanding HR tech integration patterns helps identify potential exposure points.

When does software functionality cross into joint employment territory?

When your platform enables clients to hire, fire, supervise work conditions, or determine pay rates for workers they don't directly employ. The key threshold is "substantial degree" of control, which the new rule leaves deliberately ambiguous.