What: On February 27, 2026, The U.S. Department of Labor (DOL) proposed a new rule to explain how employers should decide if a worker is an employee or an independent contractor. This new rule will make it easier for businesses to engage with and hire independent contractors, such as freelancers and gig workers.
Why: The new rule would rescind and replace DOL’s existing rule, which was issued in 2024. The 2024 rule used a six-factor test that often leaned toward treating independent contractors as employees, which many businesses saw as creating uncertainty and higher legal risk.
The proposed rule focuses on economic dependence: does the worker in question rely on the employer for their job, or do they run their own business?
The proposed rule considers two core factors:
1) Control over work: Does the worker decide how, when, and for whom they work?
2) Chance to make profits: Can the worker earn extra money or lose money depending on how they manage their work, make business choices, or spend their own money?
If both factors suggest that the worker is either an employee or an independent contractor, there is a substantial likelihood that is the accurate classification for the worker. Additionally, DOL’s proposed rule considers skill, how long the work lasts, and whether the work is part of a bigger production team. These should help guide the decision, but they are not as important as the core factors. DOL’s 2026 proposal to rescind the 2024 independent contractor rule will save small businesses an estimated $2.31 billion over the coming 10-year period (discounting at 7%). This amounts to $329 million in annualized cost savings (annualized at 7%).
Action: Comments are due by April 28, 2026. In addition, Advocacy is seeking input from small entities on both the impacts of the 2024 rule and how the current proposed rule would affect your business. Please contact Assistant Chief Counsel Janis Reyes with your comments directly.
Is your small business or entity being impacted by a proposed rule? If yes, write a comment letter to the proposing agency.