The Pendulum Swings Back: DOL Proposes to Restore 2021 Independent Contractor Framework

In 2024, under the Biden administration, the DOL rescinded the 2021 rule and replaced it with a broader six-factor “totality of the circumstances” framework. The 2024 rule treated all factors as co-equal and declined to assign predetermined weight to any particular consideration. Many employers viewed that approach as more open-ended and less predictable, particularly in industries that rely heavily on independent contractor relationships.

The current 146-page DOL proposal would reverse course again. It would rescind the 2024 rule and largely restore the 2021 “core factor” framework, with certain modifications and clarifications. If finalized, the rule would apply across the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), creating a uniform federal approach to worker classification under those statutes.

The Return to a Weighted Economic Reality Test
The proposal reestablishes a structured version of the familiar “economic reality” test. The overarching inquiry remains whether a worker is economically dependent on the employer for work or instead is in business for themselves. Unlike the 2024 rule, however, the proposal elevates two “core” factors that will carry greater weight in the analysis:

• The nature and degree of control over the work.
• The worker’s opportunity for profit or loss based on initiative and/or investment.

Under the proposed framework, when both core factors point in the same direction, there is a substantial likelihood that the resulting classification is correct. The remaining factors—skill required, permanence of the relationship and whether the work is part of an integrated unit of production—serve as additional guideposts but are unlikely to outweigh aligned core factors.

The proposal also underscores that actual practice controls over contractual language or theoretical rights. The DOL makes clear that the day-to-day realities of the working relationship matter more than carefully drafted agreements. The inclusion of eight fact-specific examples further illustrates how the factors are expected to operate in real-world scenarios.

What Employers Should Consider Now
If ultimately implemented, the proposal may make federal independent contractor classifications more predictable and, in some circumstances, more defensible. When the level of control and the worker’s opportunity for profit or loss clearly indicate that the worker operates an independent business, employers may face fewer federal hurdles than under the 2024 rule’s unweighted multi-factorial  approach.

That said, the economic reality test remains fact-intensive. Employers should carefully examine how much operational control they exercise in practice, whether workers meaningfully control pricing, scheduling and project selection, and whether workers have a genuine opportunity for profit or loss tied to initiative or capital investment. Classification decisions should not rely solely on contract language. Employers should implement a structured process for evaluating worker status at the outset of an engagement and periodically reassess classification as working relationships evolve.

Moreover, federal alignment does not eliminate state-law risk. Many states apply different, and often stricter, standards, including variations of the ABC test, industry-specific rules, and distinct wage-hour or unemployment insurance frameworks. A worker who qualifies as an independent contractor under federal law may still be deemed an employee under applicable state law. Misclassification can carry significant consequences, including liability for unpaid minimum wage and overtime, liquidated damages, tax exposure, unemployment insurance assessments, civil penalties and class or collective action litigation.

Comment Period and Next Steps
The proposed rule was published in the Federal Register on February 27, 2026, and is open for public comment through April 28, 2026. After the comment period closes, the DOL will review submissions and determine what revisions, if any, to incorporate before issuing a final rule. Employers that rely on independent contractor models may wish to evaluate whether to submit comments addressing operational realities in their industries.

The Employment Law team is closely monitoring the rulemaking process and related litigation developments. We assist clients with independent contractor audits, multistate classification analyses, drafting and revising independent contractor agreements and developing defensible classification review processes. We can also advise clients on preparing and submitting comments during the rulemaking period and on aligning operational practices with evolving federal and state standards.