Sarah M. Mugmon

Federal contractors are facing immediate changes to implement stepped-up efforts to restrict DEI discrimination, including new mandatory contract clauses, expanded audits, and significant potential legal exposure. These far-reaching changes will impact prime contractors and all tiers of subcontractors. Any employer that is a federal contractor should immediately prepare for these new compliance obligations.

DOL Proposes New Joint Employer Standard In an effort to create a uniform, nationwide standard for determining joint employer status, the U.S. Department of Labor’s Wage and Hour Division will publish a Notice of Proposed Rulemaking (NPRM) in the Federal Register on April 23, 2026. The proposed Joint Employer Rule aims to restore a standard similar to the more business-friendly Trump 1.0 rule. Specifically, the proposed rule clarifies when multiple organizations would be considered joint employers under the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. Comments are due within 60 days of the published date, or June 22, 2026. The proposed rule seeks to end nearly a decade of vacillating rules, as both the Trump and Biden administrations had tried promulgating a final rule previously. Those prior attempts created a series of conflicting executive and judicial rulings. As stated by acting Labor Secretary Keith Sonderling, this NPRM is intended to establish a “clear standard on joint employment.” Four-Factor Test The proposed rule modifies the Trump 1.0 standard, which focused heavily on requiring actual control by one company over another to establish joint employment. A prior judicial challenge to that approach was successful, requiring some modification to any new standard introduced thereafter. The proposed rule, therefore, responds by offering a four-factor test that is still heavily weighed on aspects of control. The four factors are whether a company: has the power to hire or fire a worker; supervises or controls a worker’s schedule or conditions of employment to a substantial degree; determines the rate and method of payment; and maintains a worker’s employment records. No single factor is dispositive, and the analysis will focus on the totality of the circumstances. Single National Standard Still a Goal The DOL acknowledged that some circuit courts continue to consider more factors and said the four listed factors were “not exhaustive.” Additionally, other federal agencies and several states have their own joint employer standards, some of which are directed at specific industries. For instance, the NLRB finalized its joint employer rule in late February 2026, with a similarly aligned standard that has some variances from DOL’s proposed standard. A final rule is anticipated soon after the comment period closes. Once issued, the rule may be subject to judicial challenges from interested parties that previously opposed similar regulatory approaches. Contact your FortneyScott attorney for additional information on how to submit comments and/or prepare for its impact on your workforce.

Federal contractors are facing immediate changes to implement stepped-up efforts to restrict DEI discrimination, including new mandatory contract clauses, expanded audits, and significant potential legal exposure. These far-reaching changes will impact prime contractors and all tiers of subcontractors. Any employer that is a federal contractor should immediately prepare for these new compliance obligations. The Federal Acquisition Regulatory Council (FAR Council), which sets government-wide procurement policy and regulation for all federal agencies, has moved quickly to implement Executive Order (EO) 14398 , Addressing DEI Discrimination by Federal Contractors. Specifically, the FAR Council: Issued government-wide implementation guidance and class deviation language for all federal agencies to incorporate a mandatory contract clause, as prescribed in EO 14398, as soon as April 24, 2026, in new solicitations, and by July 24, 2026, for bilateral modifications of existing contracts. The class deviation authorizes agency-wide implementation of new requirements in federal contracts before the Federal Acquisition Regulations (FAR) are amended formally. Requested emergency approval, under the Paperwork Reduction Act (PRA), to allow immediate enforcement of EO 14398’s information collection and reporting requirements. Join FortneyScott for a complimentary briefing on Monday, April 27, at noon ET . Please register here . Contact your FortneyScott attorney for additional information on how to prepare for this new contract clause.

Employers need to continue to be vigilant in their compliance efforts for DEI and related programs. Here are two quick updates: To assist employers, our most recent DC Insider-Employer Update podcast – EO 14398 and the Procurement Power Play: Compliance, Contracts, and Consequences – provides a great overview of the newest Executive Order and federal contractor compliance. Additionally, late Friday, April 10 th , DOJ announced the first False Claims Act settlement based on DEI claims against IBM for $17 million. Please contact your FortneyScott attorney for more information, and visit our website ( www.fortneyscott.com ) for our recent special webinar .