The U.S. Department of Labor’s Wage and Hour Division today published a proposed rule designed to help workers and employers better understand when a worker is an employee under the Fair Labor Standards Act and when he or she may be properly classified as an independent contractor.

The proposed rule would rescind the department’s 2024 rule addressing the classification of independent contractors and replace it with an analysis similar to the one adopted by the department in the first Trump administration in 2021. Consistent with Supreme Court and federal circuit court precedent, the proposed rule would make it easier to properly differentiate between employees with the protections under the FLSA and those workers who work as independent contractors.

The proposed rule would also apply the department’s streamlined analysis to the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act, both of which use the FLSA’s statutory definition of “employ.”

The analysis in the department’s proposed rule would:  

• Apply an “economic reality” test to determine whether a worker is in business for himself or herself as an independent contractor or is an employee economically dependent on an employer for work.
• Identify and explain two “core factors” to help determine if a worker is economically dependent on an employer for work or in business for him- or herself: (1) the nature and degree of control over the work, and (2) the worker’s opportunity for profit or loss based on initiative and/or investment.
• Identify other factors to help determine a worker’s status as an employee or independent contractor, including the amount of skill required for the work, degree of permanence of the working relationship, and whether the work is part of an integrated unit of production.
• Advise that the actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
• Provide eight fact-specific examples applying the factors to real-life circumstances.

Your feedback matters! Workers, employers, unions, associations, and independent entrepreneurs – your voice can shape the new rule. The department encourages all interested parties to submit comments on the Notice of Proposed Rulemaking, which has a 60-day comment period that closes at 11:59 p.m. ET on April 28, 2026.

Workers and employers can call the Wage and Hour Division with questions and requests for compliance assistance at its toll-free helpline, 866-4US-WAGE (487-9243). The agency’s PAID program offers employers an opportunity to self-report and resolve potential minimum wage and overtime violations under the FLSA, as well as certain potential violations under the FMLA.