New Era, New Rules - DOL Announces Proposed Rule to Clarify Standard for Independent Contractor Classification

On February 26, 2026, the U.S. Department of Labor (“DOL”) announced a new proposed rule (the “Rule”) clarifying the classification of independent contractors versus employees – the third change to independent contractor regulations since 2021. If finalized, this Rule would roll back a Biden-era rule that used a six-factor test to analyze contractor questions and replace it with a new test that focuses on two core issues: control and the opportunity for profit and loss. The Rule is open for comments until April 28, 2026.

Overview of the Rule

The Rule would confirm the DOL’s use of an “economic realities” standard to assess whether a worker qualifies as an independent contractor under key laws like the Fair Labor Standards Act, the Family and Medical Leave Act, and the Migrant and Seasonal Agricultural Worker Protection Act. It pinpoints two primary factors that are crucial in this analysis:

• the nature and degree of control over the work ➜  how much oversight does the business have over the worker’s activities?; and
• the worker’s opportunity for profit or loss based on initiative and/or investment ➜  does the worker have a real stake in their financial success?

Other less-probative factors that may be relevant depending on the circumstances include:

• the amount of skill required for the work ➜  what expertise is needed for the job?
• degree of permanence of the working relationship ➜  how stable is the arrangement?; and
• whether the work is part of an integrated unit of production ➜  is the work central to operations?

The Rule also emphasizes actual practices of the business and the worker in determining whether the worker is an independent contractor, rather than what may be contractually or theoretically possible. For instance, if a worker has the contractual power to oversee subordinates but isn’t allowed to do so in practice, that contractual authority may hold little weight in determining if they are an independent contractor.

What Does This Mean for Employers?

While the rule is still in the proposal stage and hasn’t taken effect yet, businesses—especially those in sectors heavily reliant on independent contractors like healthcare, tech, and agriculture—should take note of the Rule and its provisions. At its core, this Rule is, for the most part, a reversion back to the 2021 version of the DOL’s classification rule during the first Trump administration.

In practice, the proposal reduces some uncertainty around federal classification standards, but it does not eliminate misclassification risk. Employers should use this rulemaking period to assess current contractor arrangements and strengthen documentation supporting any independent contractor designation.

As always, don’t hesitate to reach out to a member of the Brooks Pierce Labor and Employment Team if you have any questions about the DOL’s Rule.