On February 26, 2026, the Department of Labor announced a proposed rule to revise the standard for determining whether a worker is classified as an employee or an independent contractor under the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). This comes just two years after the Department promulgated its 2024 final rule addressing the same issue and, if finalized, would replace that rule. See US Department of Labor proposes rule clarifying employee, independent contractor status under federal wage and hour laws | U.S. Department of Labor

The 2024 rule, adopted on March 11, 2024, applies a six-factor “economic realities” test to determine whether a worker is classified as an employee or an independent contractor. The six factors are weighed equally, and no one factor is dispositive. The test focuses on whether the worker is economically dependent on the employer for work, in which case the worker is classified as an employee, or instead, is in business for themselves as an independent contractor.

The proposed rule will still apply the “economic reality” test. However, the test will hinge on the identification and explanation of two “core factors,” as opposed to six equally weighted ones: (1) the nature and degree of control over the work and (2) the worker’s opportunity for profit or loss based on initiative and/or investment. If both of the core factors support the same conclusion regarding the worker’s classification, there is a strong likelihood that the classification is accurate.

However, additional factors, though less probative, may be considered in the analysis 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.

What does this mean for you? The proposed rule would lower the threshold for employers to classify workers as independent contractors. This change could benefit employers but may be detrimental to workers whose status is uncertain, as independent contractors are not entitled to many of the benefits and protections afforded to employees. In addition, compensation paid to independent contractors is subject to different tax treatment than wages paid to employees.

Employers should continue to monitor rulemaking and note that the 2024 rule is still in effect. If you have any questions or need guidance, you can contact one of the attorneys at Colantuono Guinn Keppler.

This article is informational only and not intended to be treated as legal advice