2026 March Newsletter
DOL Proposes Major Change to Independent Contractor Rules
On February 26, 2026, the U.S. Department of Labor announced a proposed rule that would roll back the 2024 independent contractor classification standard under the Fair Labor Standards Act and replace it with a more traditional economic reality test.
This change could significantly impact how employers determine whether a worker is classified as an employee or an independent contractor.
What Is Changing?
The 2024 rule used a structured six factor test to determine worker classification. The Department of Labor now believes that framework created confusion and uncertainty.
Under the proposed rule, the DOL would return to an economic reality test similar to what federal courts have historically used. The central question becomes:
Is the worker economically dependent on the employer, or are they truly in business for themselves?
Key Factors That Will Carry the Most Weight
Two factors will be especially important:
• The nature and degree of control over the work
• The worker’s opportunity for profit or loss based on initiative or investment
Additional factors include:
• The worker’s level of skill
• The permanence of the relationship
• Whether the work is integral to the employer’s business
Importantly, the DOL emphasizes that actual day-to-day work practices will matter more than contract language alone.
Broader Impact Beyond Wage and Hour Laws
The proposed rule would also apply this same classification analysis to the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act. This means worker classification could affect not only minimum wage and overtime obligations but also leave rights and protections for certain workers.
What Employers Should Do Now
While courts ultimately make their own independent decisions about worker classification, employers should still take this proposed rule seriously and prepare accordingly. Following the rule can demonstrate good faith compliance and may help defend against claims of willful violations.
HR teams and employers should consider the following steps:
1. Conduct Risk Assessments
Review relationships with independent contractors and contingent workers. Focus on actual working conditions, control over the work, autonomy, and economic dependence.
2. Align Documentation With Reality
Contracts remain important, but they will not protect you if they do not match real world practices. Ensure agreements, invoices, and engagement records accurately reflect how work is performed.
3. Evaluate Compliance Across Laws
Worker classification can impact wage and hour compliance, FMLA eligibility, and protections for certain agricultural workers. A misclassification issue may create exposure under multiple federal statutes.
4. Consider Submitting Comments
The DOL is accepting public comments on the proposed rule through April 28, 2026. Employers and associations who want clarification or adjustments may submit feedback during this period.