On February 26, 2026, the U.S. Department of Labor’s Wage and Hour Division announced a proposed new rule concerning the determination of whether a worker is an independent contractor or employee under the FLSA. The proposed new rule rescinds the 2024 Rule established by the Biden administration, replacing it with an analysis comparable to that implemented in the first Trump Administration. The new rule is advertised as providing better clarity intended to benefit both workers and employers.
With respect to the analysis in the new rule, the Department of Labor’s news release states the new rule would:
- “Apply an ‘economic reality’ test to determine whether a worker is in business for himself or herself as an independent contractor or is 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 in business for him- or herself:
- 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.”
- “Provide eight fact-specific examples applying the factors to real-life circumstances.”
The proposed new rule would also apply to the Family Medical Leave Act and Migrant and Seasonal Agricultural Worker Protection Act.
Comments to the proposed new rule are due by 11:59 p.m. Eastern Time on April 28, 2026.
Even with the guidance of the proposed new rule, working through the independent contractor analysis can be a nuanced process for employers.
