The U.S. Department of Labor (“DOL”) has issued a proposed rule that would rescind and replace the 2024 independent contractor regulation under the Fair Labor Standards Act (“FLSA”) and restore a revised “economic reality” framework for determining worker classification. The 2024 rule adopted a broad, multi-factor “totality of the circumstances” approach. In contrast, the new proposal would place greater emphasis on two core factors – a worker’s opportunity for profit or loss and the degree of control exercised by the putative employer – which the DOL believes more closely align with longstanding FLSA case law. Because this is only a proposed rule, it has no immediate legal effect, and the 2024 rule remains in place unless, and until, a final rule is issued.

Proposed “Economic Reality” Test
Under the proposed rule, the DOL would again focus on whether a worker is in business independently, and thus, an independent contractor, or is economically dependent on the potential employer, and thus, an employee.

Core factors with greater weight include:

• The worker’s opportunity for profit or loss is based on managerial skill, such as the ability to negotiate pay, choose assignments, hire helpers, or otherwise affect earnings through business decisions.
• The nature and degree of control the potential employer exercises over the work, including supervision, scheduling, methods of work, and whether the worker can provide services to others.

Additional factors considered include:

• The degree of skill required and whether the worker uses specialized skills in an independent business.
• The permanence or duration of the relationship.
• Whether the work is part of an integrated unit of production or more peripheral to the employer’s core business.

No single factor would be determinative, but the control and profit or loss factors would generally carry more weight in the overall analysis. The proposal also emphasizes that the parties’ actual working relationship will matter more than contractual language or theoretical rights.​

What Would Change if Finalized
If finalized in substantially its current form, the rule would:

• Rescind and replace the 2024 independent contractor regulation under the FLSA and adopt a revised economic-reality standard.
• Re‑center the analysis on an economic‑reality framework with weighted core factors: (1) the nature and degree of control over the work, and (2) the worker’s opportunity for profit or loss based on initiative or investment.
• Apply this same analysis for worker status under statutes that track the FLSA definition of “employ,” such as the Family and Medical Leave Act (“FMLA”) and the Migrant and Seasonal Agricultural Worker Protection Act (“MSPA”), creating a single test across these statutes.

In some circumstances, this may make it easier to support independent contractor status where workers retain genuine control over how they perform their work and have a real opportunity to affect profit and loss. At the same time, the DOL continues to signal that misclassification remains an enforcement priority, especially where workers are economically dependent on a single business.

Implementation Timeline
The proposed rule has been published in the Federal Register and is open for public comments. Stakeholders may submit written comments during the comment period, which closes at 11:59 p.m. ET on April 28, 2026. After reviewing comments, the DOL may revise the proposal and ultimately issue a final rule with a future effective date. Legal challenges are possible. Until a final rule is issued and becomes effective, the existing 2024 rule remains in place.

Barley Snyder is actively monitoring the proposed DOL independent contractor rulemaking situation. If you have questions about how the proposed rule may affect your organization, or if you would like assistance reviewing your independent contractor arrangements, please contact Hyo Jin “Jinnie” Lee or any member of Barley Snyder’s Employment Law Group.