LEGAL ALERT: DOL’s Independent Contractor Rule Nears Finalization
The U.S. Department of Labor (“DOL”) intends to revise its independent contractor rule in order to “reduce unnecessary burdens on employers and employees.” The proposed rule, now at the White House’s regulatory review office, is intended to provide greater clarity and predictability to employers and workers and would replace the 2024 classification standard adopted under the Biden administration.
Background. The Biden administration’s 2024 Rule uses an economic realities test that considers six factors in determining whether a worker is economically dependent on an employer for work or is instead in business for himself or herself. No factor is more heavily weighed than the other and additional considerations may be relevant depending on the circumstances. The DOL has expressed concerns that, in the absence of guidance on how the different factors should be weighed or applied together, especially when pointing in different directions, the 2024 Rule fails to provide sufficient clarity and predictable outcomes.
In May 2025, under the Trump administration, the DOL announced that its Wage and Hour Division would cease application of the 2024 Rule in its enforcement investigations. Importantly, however, the DOL did not repeal the 2024 Rule at that time. Thus, although the DOL stopped applying it in their own investigations, the rule remains relevant in private litigation and employers continue to face potential misclassification from workers.
The proposed replacement. In February 2026, the DOL formally proposed to rescind the 2024 Rule and replace it with a streamlined five-factor economic realities test. Although the ultimate inquiry remains whether a worker is economically dependent on the employer or is in business for himself or herself, the proposed rule seeks to provide greater structure and predictability.
The proposal places particular emphasis on 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. Unlike the 2024 Rule, where even after analysis of the relevant factors, the classification may remain unclear, under the proposed rule, where the two core factors point toward the same classification, there is a “substantial likelihood” that is the correct classification. Where they point in different directions, the remaining factors—skill required, permanence of the working relationship, and whether the work is part of an integrated unit of production—may become more significant. For additional clarity, the proposed rule emphasizes the parties’ actual practice over rights and/or responsibilities existing only contractually or in theory and proposes to include fact-specific examples for additional guidance.
Where things stand now. The DOL’s final rule was submitted to the White House Office of Information and Regulatory Affairs on September 28, 2026, the final regulatory-review stage before publication. Therefore, it is imperative to remain aware of any advancement and to remember that private litigation remains possible and state-law tests continue to apply independently. If you or your business may be affected, please contact Kessler Collins’s team of experienced attorneys to assist you in navigating these challenges and protecting your interests.
