The U.S. Department of Labor (DOL) has issued a proposed rule that could fundamentally change how businesses classify workers as either employees or independent contractors. The proposal aims to rescind current standards and return to a more comprehensive “economic reality” analysis across all laws governed by the DOL.
Key Highlights of the Proposed Rule
The DOL’s proposal seeks to replace the current analysis with a multi-factor framework designed to determine whether a worker is truly in business for themselves or is economically dependent on an employer.
- Rescission of Previous Standards. The current 2024 rule also applied an economic realities framework but differed in how certain factors were weighed and interpreted. The proposed rule reflects a broader view of economic dependence and may increase the likelihood that more workers can be classified as independent contractors rather than employees.
- Expansion Across Statutes. In a major move, the DOL proposes applying this classification analysis not just to the FLSA, but also to the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
- The “Six-Factor” Test. The proposed analysis revisits a holistic evaluation of the relationship, focusing on:
- The degree of control exercised by the employer.
- The worker’s opportunity for profit or loss based on initiative.
- The amount of investment in equipment or facilities.
- The degree of permanency in the relationship.
- The amount of initiative or judgment required for the success of the enterprise.
- The extent to which the work is an integral part of the employer’s business.
What This Means for Employers
This proposed rule reflects a shift back to a “totality of the circumstances” approach, where no single factor, such as a written contract, is controlling. Employers should be aware that a worker’s actual day-to-day working relationship will carry more weight than formal agreements.
If finalized, this may modify the six-factor economic realities test applied under the 2024 rule, altering how businesses document and defend independent contractor classifications.
Next Steps for Employers
While the rule is currently in the proposed stage, proactive steps are recommended to prepare for potential changes:
- Review Current Classifications: Assess existing independent contractor relationships under the proposed six-factor economic realities test to determine whether current classifications remain well supported.
- Assess Leave Law Implications: If workers are reclassified from employee to independent contractor status, review the impact on FMLA eligibility and other statutory protections to ensure consistent and defensible treatment.
- Evaluate Other Legal Implications: Worker classification affects more than the FLSA and FMLA. Employers should review applicable state laws, including wage and hour statutes, unemployment insurance rules, and workers’ compensation requirements, and state-specific classification tests. Because standards may differ across jurisdictions, employers must comply with the law that imposes the stricter or more protective standard.
- Consult with Counsel: Because worker classification standards may differ under federal wage and hour law, state labor statutes, unemployment insurance rules, and tax regulations, employers should consult legal counsel to ensure consistency across all applicable frameworks.
- Submit Public Comments: The DOL is accepting feedback on this proposal until 11:59 p.m. Eastern Time on April 28, 2026. Employers are encouraged to share how these changes would impact their operations. Comments may be submitted through the Federal eRulemaking Portal at https://www.regulations.gov using (RIN) 1235-AA46.
