The Bottom Line
- The DOL has proposed returning to a Trump-era “economic realities” test that places heavy weight on two core factors: the nature and degree of control over the work and the worker’s opportunity for profit or loss.
- This marks a significant departure from the broader, six-factor totality-of-the-circumstances analysis currently in effect.
- The proposed rule is not yet final and subject to a public comment period until April 28, 2026, but businesses should begin reviewing their independent contractor arrangements now.
On February 26, 2026, the U.S. Department of Labor’s (DOL) Wage and Hour Division announced a proposed rule that would revise the standard for determining whether a worker is classified as an independent contractor or employee (the “Proposed Rule”) with a focus on two “core” factors – i.e., the nature and degree of control that the individual has over the work and that individual’s opportunity for profit or loss.
If the Proposed Rule seems familiar, that’s because it largely returns to the framework adopted during the first Trump administration and would rescind the Biden-era rule currently in effect.
A Shifting Standard
In 2021, the first Trump Administration adopted a framework for assessing whether a worker is an independent contractor or employee that focused on two “core” factors:
- the nature and degree of control over the work; and
- the worker’s opportunity for profit or loss.
The Biden administration reversed course in 2024, rescinding the Trump-era rule and implementing a broader, more holistic six-factor, totality-of-the-circumstances analysis.
Now, the DOL’s Proposed Rule would reverse course yet again. Under the new proposal, the independent contractor analysis would reinstate the “economic realities” test from Trump’s first administration that places emphasis on the two “core” factors above all others. While other considerations – such as permanence of the working relationship, the degree of skill required, the worker’s investment in equipment or materials, and whether the work is integral to the employer’s business – would remain relevant, the two “core factors” are likely to be dispositive if they point toward the same outcome with regards to a worker’s classification.
What This Means for Businesses
If finalized, the Proposed Rule will be a marked shift from the current analysis and would materially affect how businesses assess and manage independent contract relationships, likely making it easier for businesses to classify workers as independent contractors. Unlike the Trump Administration’s 2021 rule, the Proposed Rule would not just apply to the Fair Labor Standards Act. The classification standard would also apply to the Family Medical Leave Act and the Migrant Season Agricultural Worker Protection Act.
What Happens Next?
The proposed rule is not yet final and is now subject to a 60-day comment period that closes on April 28, 2026. After reviewing public input, the DOL may decide to adopt the rule in its current form. In the meantime, the Biden-era rule technically remains in effect for purposes of private litigation, though the DOL has announced it will not enforce it during agency investigations.
Davis+Gilbert will continue monitoring the status of the proposed rule and will provide another update after the comment period closes.