On February 26, 2026, the Department of Labor, Wage and Hour Division issued a “Notice of Proposed Rulemaking,” revealing its intention to revoke the Biden-era definition of “independent contractor” and reinstate a 2021 rule, with a few modifications.
The Proposed Rule would modify the current standard used for identifying which workers are covered as “employees” (or, on the other hand, those not covered as independent contractors) under the FLSA, FMLA, and other federal law.
Presently, the DOL examines a worker’s whole activity and evaluates their status based on six “economic reality” factors. DOL believes the current standard sets the bar too high and deters businesses from using independent contractors for fear that they will be deemed misclassified. Accordingly, the Proposed Rule serves two purposes – first, to provide a new standard for evaluating “employee” status and second, to rescind the 2024 rule.
The Proposed Rule identifies two “core” factors that DOL believes are most telling of whether a worker is an independent contractor or an employee. These are (i) the nature and degree of control over the work; and (ii) the individual’s opportunity for profit or loss. Although no factor is alone dispositive, DOL believes these factors are the best indicators of whether a worker is “economically dependent” on an employer.
Then the Proposed Rule lists “other factors” to consider: the amount of skill required for the work; the degree of permanence of the working relationship; whether the work is part of an integrated unit of production; and a catch-all “additional factors” (i.e., other factors that might be relevant to the inquiry, but only if they somehow indicate whether the individual is in business for him- or herself, as opposed to being economically dependent upon the potential “employer” for work).
The issuance of the Proposed Rule begins a comment period, during which industry groups and others will weigh in on the proposal. We can likely expect a Final Rule sometime later this year. Stay tuned.
