On February 26, 2026, the U.S. Department of Labor announced a Notice of Proposed Rulemaking (NPRM) to revise its analysis for distinguishing between employees and independent contractors under the Fair Labor Standards Act (FLSA). Specifically, the Department is proposing to rescind a 2024 rule on that topic which it is no longer applying in its investigations and replace it with a streamlined analysis, backed by federal judicial precedent, that will provide greater clarity and predictability to workers and employers alike as to their proper classification. The Department also proposes to apply this analysis to the Family and Medical Leave Act (FMLA) and Migrant and Seasonal Agricultural Worker Protection Act (MSPA), both of which incorporate the FLSA’s relevant definitions.
In particular, the NPRM’s proposed analysis would:
- Adopt an “economic reality” test to determine a worker’s status as an employee or independent contractor, examining whether a worker is in business for him- or herself (independent contractor) or is economically dependent on a potential employer for work (employee);
- Identify and explain two “core factors”—(1) the nature and degree of the worker’s control over the work; and (2) the worker’s opportunity for profit or loss based on initiative and/or investment—that federal courts primarily consider to answer the question of whether a worker is economically dependent on someone else’s business or is in business for him- or herself;
- Identify three other factors relevant to the analysis, particularly when the two core factors do not point to the same classification: (1) the amount of skill required for the work; (2) the degree of permanence of the working relationship between the worker and the potential employer; and (3) whether the work is part of an integrated unit of production; and also note that additional factors may be considered in the analysis;
- Advise that the parties’ actual practices are more relevant than what may be contractually or theoretically possible; and
- Provide eight examples of how the economic reality factors would apply in certain real life situations.
The Department encourages interested parties to submit comments on this proposal at www.regulations.gov/docket/WHD-2026-0001. The NPRM’s 60-day comment period closes at 11:59 pm ET on April 28, 2026.
Anyone who submits a comment (including duplicate comments) should understand and expect that the comment, including any personal information provided, will become a matter of public record and will be posted without change to www.regulations.gov. The Department posts comments gathered and submitted by a third-party organization as a group under a single document ID number on www.regulations.gov, including any personal information provided.