On February 26, 2026, the U.S. Department of Labor (DOL) issued a new proposed rule, entitled the “Employee or Independent Contractor Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act.” The proposed rule would restore the DOL’s 2021 independent contractor test issued during the first Trump administration and rescind the 2024 rule issued by the Biden administration.
If adopted, the proposed rule could have significant implications for businesses that rely on independent contractors, including those in home health care, transportation, agriculture, construction, and ridesharing. Unlike employees covered by the Fair Labor Standards Act (FLSA), independent contractors are not entitled to the minimum wage or overtime pay protections of the FLSA, nor are they required to be covered by unemployment or workers’ compensation insurance.
Background
For many years, the DOL did not maintain a formal regulatory standard for distinguishing employees from independent contractors. In 2007, the agency issued Fact Sheet #13, outlining six factors derived from court decisions applying the economic reality test.
The DOL’s first formal rule on worker classification did not arrive until 2021. That rule attempted to simplify the analysis by giving greater weight to two core considerations—employer control and the worker’s opportunity for entrepreneurial gain—while also recognizing three additional factors: the skill required for the work, the permanence of the relationship, and whether the work formed part of an integrated production process.
But shortly after it was issued, the Biden administration attempted to delay and rescind it, though those actions became the subject of litigation. The administration instead moved forward with a replacement regulation, finalized in January 2024, that returned to a broader six-factor framework. The 2024 rule did not focus on any one factor, but also did not provide any details about how the balancing test should be weighted or how the factors should be looked at together. Critics argued the new rule imposed an overly restrictive approach and failed to align with judicial precedent, prompting several legal challenges.
After the Trump administration regained the White House in 2025, the administration announced that it would stop enforcing the 2024 rule and begin developing a new regulatory approach, culminating in the proposed rule now under consideration.
If the Proposed Rule is Finalized
The proposed rule would, like the 2021 standard, place primary emphasis on two core considerations: the degree of control over the work and the worker’s opportunity for entrepreneurial gain or loss. The control factor examines who directs the manner and means of the work and the extent of that control. The entrepreneurial opportunity factor considers whether the worker has the ability to influence their own profits or losses through initiative or business judgment. Under the proposal, these two primary factors would be evaluated first and, if both support the conclusion that the worker is an independent contractor, “there is a substantial likelihood that is the individual’s accurate classification.” In general, the rule’s purpose is to identify workers who “as a matter of economic reality, [are] in business for [themselves].”
The rule would also incorporate the secondary considerations recognized in the 2021 rule, including the level of skill required for the work, the permanence of the working relationship, and whether the work performed is part of an integrated unit of the business. If the two core factors result in different conclusions, these secondary considerations are intended to assist in making a determination about a worker’s classification.
As reflected in the proposal’s title, the rule would establish a classification standard not only for the FLSA, but also for the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act.