3/3/26 DOL Proposed Rule on Independent Contractor Standards

March 3, 2026

On February 26, 2026, the U.S. Department of Labor (“DOL”) issued a proposed rule that would modify the framework for determining independent contractor status under the Fair Labor Standards Act (“FLSA”). The proposal would rescind the DOL’s January 10, 2024 final rule and its six-factor analysis, replacing it with an approach more closely aligned with the rule adopted in 2021 (during President Trump’s first term in office).

Current Rule

The 2024 final rule interprets the FLSA’s definition of “independent contractor” as limited to workers who are in business for themselves and are not economically dependent on an employer for work. It applies a six-factor, totality-of-the-circumstances, analysis to determine worker classification:

1.    The worker’s opportunity for profit or loss based on managerial skill;
2.    The relative investments of the worker and the employer;
3.    The degree of permanence of the working relationship;
4.    The nature and degree of control exercised by the employer;
5.    The extent to which the work performed is integral to the employer’s business; and
6.    The worker’s skill and initiative.

These factors are non-exhaustive, and no single factor is dispositive. Instead, all relevant circumstances are weighed to assess the worker’s economic dependence on the employer. The expanded and holistic nature of this test has generally made it more difficult for workers to qualify as independent contractors.

Proposed Rule

The proposed rule asks for the reimplementation of an analysis to determine the relationship status between employers and workers. The analysis first uses the economic reality test to determine whether a worker is an independent contractor, or an economically dependent employee. The analysis emphasizes two core factors:

•  The nature and degree of control exercised over the work; and

• The worker’s opportunity for profit or loss based on initiative and investment.

In addition, three secondary factors may be considered:

• The degree of skill required for the work;

• The permanence of the working relationship; and

• Whether the work is part of an integrated unit of production.

Under the proposal, the actual practice of the parties carries greater weight than contractual language or theoretical possibilities. The rule also includes a severability provision, ensuring that if any portion of the regulation is invalidated, the remaining provisions would remain in effect.

The DOL further proposes applying this analysis to the Family and Medical Leave Act (“FMLA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”), both of which incorporate the FLSA’s employment framework.

Implications for Employers

According to the DOL, the proposed rule is intended to provide greater clarity, reduce litigation risk, and improve administrative efficiency in worker classification determinations. If adopted, the revised framework may result in more workers being classified as independent contractors.

The DOL is accepting public comments on the proposed rule for 60 days, through 11:59 p.m. ET on April 28, 2026. Employers should consult legal counsel before reclassifying any workers to ensure compliance with the final rule once adopted.
 
Please contact Andrew Schpak at 503-276-2156 or aschpak@barran.com or Winslow Robinson at 503-276-2103 or wrobinson@barran.com with any questions or for assistance in determining your employment compliance.