The U.S. Department of Labor’s Wage and Hour Division recently announced a proposed rule that would rescind the current rule addressing the classification of independent contractors and replace it with an analysis for employee classification similar to the one adopted by the DOL in 2021.
The analysis in the proposed rule would:
- Apply an “economic reality” test to determine whether a worker is in business for himself or herself as an independent contractor or is an employee economically dependent on an employer for work.
- Identify and explain two “core factors” to help determine if a worker is economically dependent on an employer for work or in business for him- or herself:
- The nature and degree of control over the work.
- The worker’s opportunity for profit or loss based on initiative and/or investment.
- Identify 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.
- Advise that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
- Provide eight fact-specific examples applying the factors to real-life circumstances.
The DOL encourages all interested parties to submit comments on the proposed rule, which has a 60-day comment period that closes at 11:59 p.m. ET on April 28, 2026.