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Highlights
Impacted Employers:Allemployers that use or intend to use independent contractors.
Effective Date:Not applicable. See below.
Summary:The U.S.Department of Labor (DOL) has proposed changes to the test for determining whether workers are employees or independent contractors under the Fair Labor Standards Act (FLSA). In addition, the Department proposes to apply this analysis to the Family and Medical Leave Act (FMLA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
Next Steps:Review the proposed rule and determine whether to submit comments on it, consulting legal counsel if necessary.Watch for developments.
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The Details
Background
The DOL uses an "economic realities" test to determine whether workers are covered by the FLSA and entitled to minimum wage, overtime, and other wage and hour protections. In recent years, the test has gone through changes with each new administration.
2024 Final Rule
Under President Biden, the DOL published a final rule that took effect on March 11, 2024. Under that rule, the independent contractor test:
- Reverted to a totality-of-the-circumstances economic reality test, where no single factor or group of factors is assigned any predetermined weight; and
- Considered six factors, including the investments made by the worker and the potential employer.
2026 Proposed Rule
On Feb. 26, 2026, the DOL published a proposed rule that would revoke the 2024 rule and adopt an analysis similar to the one established by the DOL in 2021 during President Trump’s first term. Specifically, the proposed rule would:
- Focus the FLSA’s independent contractor test on two “core factors” to help determine if a worker is economically dependent on an employer for work or in business for themselves: (1) the nature and degree of control over the work, and (2) the worker’s opportunity for profit or loss based on initiative and/or investment.
- Identify three 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.
- Provide eight fact-specific examples applying the factors.
- Also apply the new analysis to the FMLA and the MSPA.
The DOL is encouraging employers and other interested parties to submit comments on the Notice of Proposed Rulemaking. Comments are due before midnight on April 28, 2026. After the comment period ends, the DOL will consider the comments as it determines whether and how to move forward with a final rule. The rulemaking process typically takes months.
Next Steps