DOL Proposes Rule Reversion to Support Use of Independent Contractors

On February 25, 2026, the US Department of Labor announced its proposal to encourage the use of independent contractors by replacing a 2024 Biden-era rule with the pre-Biden version of the rule with some changes. The Department claims the proposed rule is needed to stimulate the use of independent contractors rather than employees by eliminating ambiguity over the two classifications. According to the Federal Register, “the Department has concerns that the 2024 rule could be viewed as more restrictive of independent contractors than the law requires.” And “[w]hile the Department maintains that preventing the misclassification of FLSA-covered employees as independent contractors is an important policy goal, it is equally important that the Department’s guidance not be viewed as chilling independent contracting arrangements that comply with the statute.” Secretary of Labor Lori Chavez-DeRemer announced, “The tens of millions of Americans who work as independent contractors are helping drive the Golden Age of the American economy” and the new rule will “protect these workers’ entrepreneurial spirit and simplify compliance for American job creators navigating a modern workplace, all while maintaining robust protections for employees under the Fair Labor Standards Act.”

The DOL’s proposal seeks to revert to the “economic reality” test with an emphasis on two “core factors:”  (1) the nature and degree of control over the work and (2) the worker’s opportunity of profit or loss based on initiative and/or investment. If the core factors of control and opportunity of profit or loss do not point in the same direction, then consideration should be given to three non-exhaustive factors including (3) the amount of skill required for the work, (4) degree of permanence of the relationship, and (5) whether the work is part of an integrated unit of production.

The proposed rule includes new examples of how to apply the factors in certain scenarios. It suggests that independent contractors may include, among other workers, an individual who performs roofing work for a commercial construction company—simply because that worker possesses roofing skills as a prerequisite to qualification for the job opportunity such that job training is not required.

When employees are reclassified as independent contractors, they are no longer entitled to minimum wage and overtime pay under the Fair Labor Standards Act, workers compensation for physical injuries, health and safety standards under the Occupational Safety and Health Act, Social Security and Medicare, and the many other benefits and protections provided by employment laws.