DOL Announces Proposed Independent Contractor Rule

On Feb. 26, 2026, the U.S. Department of Labor (DOL) announced a proposed rule that would rescind the department’s 2024 final independent contractor rule and replace it with an analysis for employee classification under the Fair Labor Standards Act similar to the one adopted by the DOL in 2021.

The 2024 final rule used a multifactor, totality-of-the-circumstances analysis to assess whether a worker is an employee or an independent contractor under the FLSA. Under this rule, six economic reality factors were all weighed to assess whether a worker was economically dependent on a potential employer for work, according to the totality of the circumstances.  

The proposed rule, like the prior rule from 2021, would apply an economic reality test to determine whether a worker is in business for themself as an independent contractor or is an employee economically dependent on an employer for work. This test would primarily focus on two core factors:  

• The nature and degree of control over the work; and
• The worker’s opportunity for profit or loss based on initiative and/or investment;

According to the DOL, the proposed rule would make it easier to properly differentiate between employees and independent contractors. Interested parties may submit comments on the proposed rule, which has a 60-day comment period that closes at 11:59 p.m. ET on April 28, 2026.