The DOL Issues New Proposed Rule on Worker Classification

On February 26, 2026, the U.S. Department of Labor (“DOL”) issued a Notice of Proposed Rulemaking (“NPRM”) that would overhaul the federal test used to determine whether a worker is an employee or independent contractor under the Fair Labor Standards Act. This proposal extends the same test to the Family and Medical Leave Act and Migrant and Seasonal Agricultural Worker Protection Act.

If finalized, the rule would rescind the 2024 classification regulation and reinstate, with modifications, the “economic reality” framework previously adopted in 2021, focusing on two core factors of economic dependence. The DOL proposed returning to a more structured form of the economic reality test, assessing whether a worker is in business for themselves (independent contractor) or economically dependent on the employer (employee).

When determining whether a worker is an employee or independent contractor, the modified economic reality test gives the greatest weight to two core factors:

• Nature and Degree of Control: whether the worker controls meaningful aspects of the work; and
• Opportunity for Profit or Loss: whether the worker’s managerial decisions affect their economic gain or risk.

If the two core factors conclude with conflicting classifications, the analysis turns to three additional (though non-exhaustive) factors:

• The amount of skill required to do the job;
• The degree of permanence of the relationship between the worker and the potential employer; and
• Whether the work is part of an integrated unit of production.

The NPRM emphasizes that actual practice, not contractual language, controls the analysis. According to the DOL, the NPRM provides more clarity and predictability in determining a worker’s classification. Interested parties may submit comments on the proposal through April 28, 2026.