What happened
On February 26, 2026, the U.S. Department of Labor (DOL) announced a proposed rule. It deals with who is an employee and who is an independent contractor under the Fair Labor Standards Act (FLSA). The proposal was published in the Federal Register the next day, at 91 FR 9932.
The proposal would remove the test DOL adopted in 2024, found in 29 CFR part 795. In its place, DOL would bring back the test from its January 2021 rule, with some changes. DOL also proposes to use the same test under the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act.
The main question stays the same. Is the worker, as a matter of economic reality, in business for himself or herself? The proposal names two “core” factors. One is the nature and degree of control over the work. The other is the worker’s opportunity for profit or loss. Three other factors also count. They are the skill the work requires, how permanent the relationship is, and whether the work is part of an integrated unit of production. The proposal says the actual practice of the parties matters more than what a contract says is possible.
This is a proposal, not a final rule. The comment period closed on April 28, 2026. As of September 17, 2026, DOL’s rulemaking page still lists the rule as proposed.
What it means for workers
The FLSA’s minimum wage and overtime rules protect employees, not independent contractors. So the test matters to anyone paid on a 1099.
For now, the 2024 rule is still on the books. DOL said in Field Assistance Bulletin 2025-1 (May 1, 2025) that its investigators no longer apply the 2024 rule’s analysis. The same bulletin says the 2024 rule remains in effect for private lawsuits. Courts also apply their own economic reality tests.
State law is separate. The proposal does not address state tests. New Jersey, for example, uses the stricter ABC test for its wage laws. A worker may be an employee under state law even if the federal answer is different.
What it means for employers
A label in a contract does not decide the question under the current rule or the proposed one. The proposal looks at what happens in practice. Businesses that use contractors in New York, New Jersey or Florida still have to meet each state’s own test, along with the federal one.
What to do now
Workers: keep your own records of hours, pay, and who sets your schedule and rates. Those facts matter under every version of the test.
Employers: review contractor relationships against the current federal rule, the proposal, and state law. Watch the Federal Register for a final rule and its effective date.
If you have questions about your own situation, speak with a wage-and-hour lawyer.
This summary is general information, not legal advice. Usher Law Group was not involved in this matter.
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