DOL Proposes New Independent Contractor Rule — What Workers Need to Know

On February 26, 2026, the Department of Labor's Wage and Hour Division announced a proposed rule that would rescind the Biden-era 2024 independent contractor classification standard and replace it with a streamlined analysis based on the framework the DOL originally adopted in 2021.

The comment period is open for 60 days and closes on April 28, 2026.

Here's what workers need to understand about this proposed rule and why it matters.

What's Actually Changing

The 2024 rule used a six-factor "totality of the circumstances" test to determine whether a worker is an employee or an independent contractor under the FLSA. All six factors had equal weight. No single factor — or combination of factors — was supposed to matter more than any other. The result, according to the DOL, was a test that was vague, unpredictable, and difficult for workers and businesses to apply in real-world situations.

The proposed rule would replace that approach with what the DOL calls a more "streamlined" analysis built around two "core factors" that carry greater weight than the others:

The nature and degree of the employer's control over the work. This looks at whether the employer controls how, when, and where the work gets done — including things like scheduling, supervision, and the ability to set prices or pay rates.

The worker's opportunity for profit or loss based on initiative and/or investment. This examines whether the worker can earn more by exercising business judgment, managing their own equipment or helpers, or making entrepreneurial decisions — or whether they're simply paid for showing up and doing what they're told.

If both of these core factors point in the same direction — say, both indicate the worker is an employee — the DOL says there is a "substantial likelihood" that's the correct classification. The remaining factors (skill required, permanence of the relationship, and whether the work is part of an integrated unit of production) are still considered, but the DOL says they are "less probative" and "highly unlikely, either individually or collectively, to outweigh the combined probative value of the two core factors."

The proposed rule also makes clear that what actually happens on the job matters more than what a contract says. If a company's independent contractor agreement says you "set your own schedule" but in reality you're expected to show up at 7:00 a.m. every day or lose your position, the DOL is going to look at the reality of the arrangement — not the piece of paper.

Why This Matters for Workers

Worker misclassification is one of the most widespread labor violations in the country. When an employer calls you an independent contractor instead of an employee, it means you don't get overtime pay, you don't get minimum wage protections, you don't get FMLA leave, and you don't get the benefit of your employer paying their share of Social Security and Medicare taxes. You also lose workers' compensation coverage and unemployment insurance.

Some workers genuinely are independent contractors — and the DOL's proposed rule expressly aims to protect their ability to operate independently. As Secretary of Labor Lori Chavez-DeRemer put it, the rule is designed to "protect these workers' entrepreneurial spirit and simplify compliance for American job creators."

But a lot of workers who get classified as independent contractors aren't running their own businesses at all. They show up to the same job site every day, use the company's equipment, follow the company's instructions, and have no real ability to profit from their own initiative. Those workers are employees under the law — regardless of what their employer calls them or what a contract says.

The DOL's proposed rule is designed to make it easier to draw that line. And for workers who are being misclassified, it provides a clearer framework for challenging that classification and recovering the wages they're owed.

The Eight Examples

One of the more useful features of the proposed rule is that it includes eight fact-specific examples showing how the core factors and other considerations apply to real-world situations. The 2024 rule didn't include examples in its regulatory text, which the DOL says contributed to the confusion around how to apply it.

These examples walk through different types of working arrangements — everything from construction workers to home-based professionals — and show how the analysis plays out depending on the facts. If you're trying to figure out whether your own situation looks more like employment or independent contracting, these examples are worth reviewing.

What This Means for Construction, Trucking, and Other Industries

If you work in construction, trucking, home health, landscaping, janitorial services, or any other industry where independent contractor classification is common, pay attention. These are the industries where misclassification is most rampant — and where workers lose the most money because of it.

The proposed rule's emphasis on control and opportunity for profit or loss as the two most important factors is directly relevant to the kinds of arrangements we see in these industries. A construction worker who shows up to the same general contractor's job sites every day, uses the company's materials, follows the company's foreman, and gets paid by the hour is almost certainly an employee under this test — no matter what the paperwork says.

What You Can Recover if You've Been Misclassified

If you've been misclassified as an independent contractor when you should have been treated as an employee, you may be entitled to:

Back pay for unpaid overtime going back two years — or three years if the misclassification was willful.

Liquidated damages equal to the amount of your unpaid wages, effectively doubling your recovery. Liquidated damages are the default under the FLSA — the employer has to prove good faith to avoid paying them.

Attorney's fees and costs paid by your employer.

And remember — misclassification claims aren't limited to one worker. If your employer is misclassifying you, they're probably misclassifying everyone in the same position. FLSA collective actions allow groups of similarly situated workers to bring their claims together.

What You Should Do

This is still a proposed rule — it hasn't taken effect yet. There's a 60-day comment period, and the final rule could look different from what's been proposed. But the DOL's direction is clear: they want a test that's simpler, more predictable, and easier to apply. And in the meantime, WHD is already using the 2021 framework — which is essentially the same analysis — in its enforcement actions.

If you think you've been misclassified as an independent contractor, don't wait for the final rule. The law already protects you. Start paying attention to how your work is actually structured — who controls your schedule, whether you use the company's equipment, whether you can take on other clients, whether you have any real opportunity to profit from your own business decisions. If the answers point toward employment, you may have a claim right now.

You can also contact the DOL's Wage and Hour Division at 1-866-4-US-WAGE (1-866-487-9243) for questions about your classification.

And if you want to talk to a lawyer about your situation, we're here. At Simpson, PLLC, we represent workers in overtime cases across the country. If you're being called an independent contractor but treated like an employee, contact us today for a free consultation.

This blog post is for informational purposes only and does not constitute legal advice. If you have questions about your classification or wage rights, please contact our office for a consultation.

Simpson, PLLC 100 Parkgate Dr., Ext. Suite 205 Tupelo, MS 38801 jack@simpson-pllc.com | (662) 913-7811