By: Alexandria Hodge, Esquire and Brittany Shields, PK Law Summer Intern
By: Alexandria Hodge, Esquire and Brittany Shields, PK Law Law Clerk
On February 27, 2026, the U.S. Department of Labor (“DOL”) issued a proposed rule to revise how workers are determined to be an employee or independent contractor under the Fair Labor Standards Act (FLSA). The proposed rule rescinds and replaces DOL’s existing rule, which was issued in 2024, and largely restores the framework of the 2021 Rule with some modifications.
Additionally, the proposal includes extending this worker classification test under the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).
Revised Approach to Economic Dependence
The proposed change seeks to generally readopt the 2021 Rule that an individual is an employee when they are economically dependent on an employer for work. This change brings the analysis back to whether the individual is dependent on the business for continued work only in the context of the worker’s specific line of work with the business, and not his unrelated entrepreneurial activities. The change also aims to move away from Rule 2024’s focus on whether the worker is economically dependent on the business for income and life’s necessities, such as housing and food. For instance, an independently wealthy worker may still be economically dependent on an employer.
Two “Core Factors”
One of the most significant proposed changes is the return of emphasis on two primary factors used to determine worker status, the nature and degree of control over the work and the worker’s opportunity for profit or loss. Under the proposal, these two factors would be analyzed first. If both point toward the same classification, then this is likely the correct classification. The remaining factors generally carry less weight and are intended to serve as guideposts, although even when taken collectively, they may still not outweigh the two core factors.
- Changes to the “Control” Factor
The first core factor emphasizes whether a worker has substantial control over key aspects of their work, such as scheduling, project selection, workload, or the ability to work for others. If a business exercises substantial control over the individual’s key aspects of work performance, then this suggests the individual is an employee.
A notable change from the 2024 Rule that the DOL is proposing is that being subject to particular compliance requirements does not automatically make an individual an employee. For instance, health and safety standards, a mandate to carry insurance, or quality control measures do not tip the scale more heavily in either direction. The DOL reasons that these measures are designed to create a safer, healthier workplace that benefits everyone, and using them to tip the scale one way or the other could lead employers to avoid these safeguards.
- Clarification of Profit or Loss Opportunities
The second core factor focuses on whether the worker can increase profits or incur losses through their own business decisions and investment management. If the worker can invest in tools or equipment, manage expenses, expand services, or take on additional work, he may be an independent contractor. But if the investment is merely a requirement by the employer, this would not support an independent contractor determination. An example is a trucker investing his own money into improving his truck to perform more deliveries.
However, if the worker can only increase earnings by working more hours or at a faster pace, then he is likely an employee. An example here would be an hourly worker choosing to work more than 40 hours per week to increase his earnings, as he lacks the ability to manage investments or exercise initiative due to fixed pay and the inability to determine his work assignments.
Remaining Factors for Analysis
There are other factors to consider, but these generally are meant as guidance for fact-based analysis.
- Amount of Skill Required
First is the amount of skill required for the work. Specialized skills not provided by the employer suggest independent contractor status, while work requiring little training or training taught by the employer may indicate employee status.
The 2024 Rule required workers to have specialized skills and apply them in business-like ways. This proposal, however, focuses only on specialized skills and whether the employer provides training, which may make it easier to classify as an independent contractor. The DOL also proposes moving the analysis of how workers use their skills within the employer’s business initiatives back to the profit and loss analysis to create clear distinctions between the factors.
- Permanence of the Relationship
A relationship that is definite in duration or sporadic is more likely to be an independent contractor relationship. Work that is indefinite in duration or continuous weighs in favor of the individual being an employee. However, seasonal work does not automatically weigh in favor of one being an independent contractor. A worker who performs work only during a specific season but returns each year, such as a housekeeper at a ski resort, may be deemed to have a long-term, indefinite relationship with the employer and be an employee since the work is only available during the seasons in which the individual works.
This proposal removes the concepts of work exclusivity and initiative from the permanence factor consideration and regroups them with control and opportunity for profit and loss, respectively.
- Integration Into the Business
Under the 2024 Rule, this factor considered how important or central the individual was to the employer’s business. If the individual’s work is segregable from the business’s production process, then they are more likely to be an independent contractor. A newspaper editor who is deeply intertwined in every part of the newspaper’s production process is likely an employee, whereas a freelance journalist responsible for one article is likely segregated sufficiently from the production process to be considered an independent contractor.
Greater Emphasis on Real-World Practices
The proposed rule emphasizes that actual working relationships matter more than theoretical or reserved contractual rights. While contractual terms may be considered, the DOL states that practical realities between the employer and the worker should carry greater weight in the analysis.
Alignment of FMLA and MSPA Regulations
The DOL proposes to unify the proposed rule with the worker classification test under the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). The same analysis would be used in these statutes, as well. The six factors currently listed in the MSPA would also be replaced with the factors discussed in the proposal.
What This Means for Employers
If adopted, the proposed rule would shift the analysis away from the broad six-factor balancing test introduced in 2024 and back toward a framework that emphasizes the two “core factors”—control and opportunity for profit or loss. The remaining factors are to be used as guidance for factual analysis.
Businesses that rely on independent contractors—particularly in education, healthcare, information technology, and project-based industries—may need to review their worker classifications and ensure their practices align with the revised guidance.
Employers should evaluate whether the benefits from worker reclassification outweigh potential costs. Some considerations may be whether reclassifying an employee as an independent contractor is worth relinquishing autonomy to the worker, the costs associated with the implementation of reclassifying workers, whether your business typically classifies workers as employees due to perceived legal uncertainty under the 2024 Rule (and could now reclassify workers as independent contractors), or whether reclassified worker relationships fit into your business model.
If adopted, this rule would apply only to the DOL’s analysis of worker classification and would not impact state classifications.
Comments regarding the proposed rule can be submitted online via www.regulations.gov or via mail and are due by April 28, 2026. PK Law will continue to monitor the proposed rule and provide an update on the final rule.
Reference: Employee or Independent Contractor Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act, 91 Fed. Reg. 9932-76 (proposed Feb. 25, 2026) 2026-03962.pdf (last visited March 13, 2026).
Alexandria M. Hodge is an Associate Attorney in the Firm’s Education, Labor and Employment Group, primarily representing the Firm’s school board clients by providing guidance and representation in investigations, mediations, hearings, proceedings before the State Board of Education, and in federal and state courts. Her experience spans pupil services, policy, special education, compliance monitoring, labor and employment, Title IX, and student discipline. Ms. Hodge can be reached at 410-740-3162 and ahodge@pklaw.com.
Special thanks to PK Law Law Clerk, Brittany Shields, for her assistance with drafting this article. Brittany is a current third year law student at Mitchell Hamline School of Law and is expected to graduate in May of 2026.
