On February 26, 2026, the Department of Labor (DOL) proposed a new rule relative to classification standards for independent contractors. The proposed rule simplifies the process and eliminates the confusion for employers who are faced with the task of classifying workers as employees or independent contractors.

The proposed rule would rescind the 2024 rule put into place under the Biden administration, while adopting a similar standard issued under the first Trump administration. The proposed rule looks at the “economic realities” rather than the “totality of the circumstances”.

The proposed rule sets forth a 5-prong analysis to determine whether an employee is an independent contractor. The DOL’s proposed analysis is as follows:

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 DOL encourages all interested parties to submit comments on the proposed rule which has a 60-day comment period that runs through April 28, 2026. In the meantime, employers should review classifications under both tests to insure that the employee is properly classified as an independent contractor. Further, employers with workers in multiple jurisdictions should review their state’s specific wage statutes which may require additional factors in the analysis.

If you have any questions about this rule or need any assistance, please contact our Labor & Employment team.

Any information included here or through our website is presented solely for general informational purposes and is not in any way intended as legal advice, is not a substitute for getting actual legal advice from an attorney, and should not be acted upon as legal advice without first seeking qualified professional counsel specific to your needs and situation. Additionally, by providing this general information and the information on our website, no attorney client relationship is created.

With Much Anticipation, The DOL Released a Proposed Independent Contractor Rule

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