On Friday, February 27, 2026, the Wage and Hour Division of the U.S. Department of Labor published a proposed rule addressing the issue of employer versus independent contractor status under the federal Fair Labor Standards Act. By extension, the rule would also set the standard under the federal Family Medical Leave Act because its definition of employee is directly tied to the FLSA. The same would be true for the federal Migrant and Seasonal Agricultural Worker Protection Act.
The analysis in the department’s proposed rule has the following key components:
- Describes an “economic reality” test balancing whether the individual is in business for himself/herself or, instead, whether the person is economically dependent on an employer for the work.
- Identifies and explains the primary “core factors” to determine if the economic realities indicate independent contractor or employee status, including: (1) the nature and degree of control over the work, and (2) the worker’s opportunity for profit or loss based on initiative, business acumen, and/or investment. Under the proposed rule, these core factors are the most probative.
- Identifies other factors to weigh, which include: skill required for the work; permanence and repetition of the relationship; and whether (and if so how much) the work is integrated within the alleged employer’s operations.
- The facts of the relationship are key, as opposed to what may be contractually or theoretically possible.
- Provides a number of illustrative examples to highlight application of the proposed rule.
The DOL encourages employers and other interested parties to submit comments. The 60-day comment period closes on April 28, 2026.
Bottom Line
The DOL’s proposed rule provides a more straightforward analysis of independent contractor status for purposes of the FLSA. As constructed, the proposed rule tends to be more employer-friendly, meaning, application of the standard may decrease risk of independent contractor misclassification. However, the proposed rule is a good reminder that the actual facts of the relationship matters the most. Although a well-written independent contractor agreement is of paramount importance, it will not necessarily save the day if the facts do not support such status.