The U.S. Department of Labor (“DOL”) has proposed significant changes to the federal independent contractor standard under the Fair Labor Standards Act (“FLSA”), signaling another major shift in how employers should evaluate worker classification. The proposed rule, announced on February 26, 2026, would rescind the Biden Administration’s 2024 Final Rule and largely return to a framework more favorable to independent contractor relationships.
For employers that rely on contractors—including businesses in healthcare, transportation, construction, staffing, hospitality, and the gig economy—the proposal could substantially affect compliance strategies, litigation exposure, and workforce management decisions.
The 2026 Proposed Rule
Under the proposed rule, the DOL would move away from the broad, unweighted analysis established in 2024 and instead place primary emphasis on two “core” factors:
- The worker’s degree of control over the work
- The worker’s opportunity for profit or loss
The DOL stated that the 2024 rule created uncertainty because it failed to explain how competing factors should be weighed, resulting in inconsistent outcomes and discouraging legitimate independent contractor relationships.
The proposed rule would restore a more structured framework similar to the 2021 Trump Administration rule, while still retaining additional secondary considerations such as:
- Skill required
- Permanency of the relationship
- Integration of the worker’s services into the business
The proposal also seeks to extend this framework beyond the FLSA to additional federal laws, including the Family and Medical Leave Act (“FMLA”) and the Migrant and Seasonal Agricultural Worker Protection Act.
The proposal is currently subject to public comment and is not yet final.
The Current 2024 Final Rule Remains in Effect
Although the DOL has proposed rescinding it, the 2024 Final Rule remains the current governing standard unless and until a new rule is finalized.
The 2024 rule applies a six-factor “economic reality” test with no predetermined weighting assigned to any factor. The factors include:
- Opportunity for profit or loss
- Investments by the worker and employer
- Degree of permanence of the relationship
- Nature and degree of control
- Whether the work is integral to the employer’s business
- Worker’s skill and initiative
According to the DOL, all factors must be considered under a totality-of-the-circumstances analysis, with no single factor controlling the outcome.
Many employers criticized the 2024 rule as overly vague and difficult to apply consistently, arguing that it increased enforcement risk and made independent contractor classifications less predictable.
Courts Continue to Focus on the Reality of the Relationship
Recent court decisions demonstrate that worker classification disputes remain highly fact-specific regardless of changing regulations.
In Galarza v. One Call Claims, LLC (11th Cir. 2025), the court emphasized that independent contractor agreements alone do not control classification outcomes and that workers may still qualify as employees if they are economically dependent on the business.
Likewise, in Gilbo v. Agment, LLC (6th Cir. 2020), the court examined factors such as control, profit opportunity, permanence, and whether the workers were integral to the business in evaluating classification under the FLSA.
These decisions reinforce that courts will continue to examine how work is actually performed—not simply how the relationship is labeled.
Practical Considerations for Employers
Even if the proposed 2026 rule becomes final, employers should remain cautious when classifying workers as independent contractors. Federal standards may continue to change, and many states impose stricter classification requirements that remain unaffected by federal rulemaking.
Employers should consider:
- Auditing existing contractor relationships
- Evaluating the actual degree of control over workers
- Reviewing whether contractors have genuine entrepreneurial opportunities
- Ensuring contractor agreements align with day-to-day operational realities
- Monitoring state law developments and ongoing litigation
Businesses should also recognize that courts often focus less on contractual labels and more on whether the worker is truly operating an independent business.
Key Takeaway
The DOL’s 2026 proposal represents another significant shift in federal independent contractor policy and reflects the continuing political and regulatory debate surrounding worker classification. While the proposed rule may ultimately provide employers with greater predictability, uncertainty remains until the rulemaking process and anticipated legal challenges are resolved. Employers should continue to evaluate contractor relationships carefully and ensure that classifications are supported by the actual economic realities of the working arrangement.