On February 26, 2026, the U.S. Department of Labor’s Wage and Hour Division (DOL) announced a newly proposed rule that would determine when a worker may be classified as an independent contractor under the Fair Labor Standards Act and related federal laws.
The newly proposed rule, if finalized, would rescind the current DOL 2024 Final Rule addressing the classification of independent contractors and replace it with an analysis for employee classification similar to the one adopted by the DOL in 2021. According to the DOL, the proposed rule would align more consistently with Supreme Court and federal circuit court precedent, and, in theory, make it easier to properly differentiate between employees entitled to protection under the Fair Labor Standards Act and those who work as independent contractors.
If finalized, the proposed rule would also apply to the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act, both of which use the FLSA’s statutory definition of “employ.”
Employers should keep in mind that federal rules do not displace state “ABC” tests for independent contractors (e.g., California), state-specific wage statutes and joint employment standards.
The DOL’s proposed rule seeks to:
- Apply an “economic reality” test (as opposed to the current “totality-of-the-circumstances” test) to determine whether a worker is truly working for themselves as an independent contractor or should they be properly classified as an employee economically dependent on an employer for work.
- Identify and explain two “core factors” to help determine if a worker is economically dependent on an employer for work or independently employed:
- The nature and degree of control over the work.
- The worker’s opportunity for profit or loss based on initiative and/or investment.
- Identify other factors to help determine a worker’s status as an employee or independent contractor, including the amount of skill required for the work, degree of permanence of the working relationship, and whether the work is part of an integrated unit of production.
- Advise that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible; and
- Provide eight fact-specific examples applying the factors to real-life circumstances.
Interested parties may submit comments on the proposed rule as follows:
- By mail: Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, N.W., Washington, DC 20210.
The comment period will close at 11:59 p.m. EST on April 28, 2026.