News

🗞️ The Gig Work Pendulum Swings Again: DOL Proposes to Rescind 2024 Independent Contractor Rule

The DOL proposes rescinding its 2024 independent contractor rule under the FLSA, reverting to a five-factor economic reality test — with two elevated "core factors" — modeled on the 2021 rule. Public comments close April 28, 2026.

onthelaborfront

26 Feb 2026 — 4 min read

On February 26, 2026, the U.S. Department of Labor's Wage and Hour Division announced a proposed rule to rescind the 2024 final rule on worker classification under the Fair Labor Standards Act (FLSA) and replace it with an analysis closely modeled on the department's 2021 rule. The proposal marks the latest turn in a years-long regulatory see-saw over how federal law distinguishes employees — who are entitled to minimum wage, overtime, and other FLSA protections — from independent contractors, who are not.

The 2024 rule, which took effect March 11, 2024, applied a six-factor "totality of circumstances" economic reality test in which no single factor carried greater weight than another. Critics from business argued it raised the bar for independent contractor classification and created compliance uncertainty. Worker advocates, by contrast, contended it better protected workers from misclassification and wage theft.

The proposed 2026 rule returns to a five-factor framework that elevates two "core factors" — the nature and degree of control over the work, and the worker's opportunity for profit or loss — as the most probative elements of the inquiry, while treating three additional factors (skill required, permanence of the relationship, and integration into the employer's production) as secondary considerations that are "highly unlikely" to outweigh the core factors. The department asserts this approach aligns more closely with Supreme Court and federal circuit court precedent and will improve compliance predictability for both workers and employers.

The proposal also extends the streamlined analysis to the Family and Medical Leave Act and the Migrant and Seasonal Agricultural Worker Protection Act, both of which rely on the FLSA's definition of "employ."

Worker classification under the FLSA has been contested across multiple administrations. Prior to 2021, the DOL relied on informal guidance — primarily Fact Sheet #13 — outlining multiple non-determinative factors under a traditional economic reality framework. In January 2021, the department codified a rule that streamlined this analysis around a five-factor test with two elevated core factors, a move widely viewed as easing the standard for independent contractor classification.

The incoming administration in 2021 delayed and attempted to withdraw the 2021 rule, leading to litigation in the Eastern District of Texas that vacated the withdrawal and reinstated the 2021 rule. In October 2022, the department issued a new notice of proposed rulemaking, and in January 2024 finalized a six-factor rule that returned to a totality-of-circumstances approach without prioritizing any single factor.

After the current administration took office in 2025, the DOL issued Field Assistance Bulletin 2025-1, announcing it would not enforce the 2024 rule while pursuing a replacement. The February 26, 2026 NPRM formalizes that intent and opens the rulemaking record for public comment.

The durability of any DOL independent contractor rule faces heightened uncertainty following the Supreme Court's June 2024 decision in Loper Bright Enterprises v. Raimondo, which overruled the Chevron doctrine. Courts are no longer required to defer to agency interpretations of ambiguous statutes, meaning the legal weight of any final rule will depend more heavily on its alignment with the FLSA's text and judicial precedent — an argument the department explicitly invokes in the proposal's framing.

It is also worth noting that the FLSA rule governs classification only for purposes of federal wage and hour law. Other federal statutes (including the Internal Revenue Code and the National Labor Relations Act), as well as state laws — including the stricter ABC test used in states such as California and Massachusetts — operate independently and are unaffected by this rulemaking.

Key Points

The DOL proposes rescinding the 2024 six-factor independent contractor rule under the FLSA and replacing it with a five-factor framework — modeled on the 2021 rule — that elevates two "core factors" above three secondary ones.
The two elevated "core factors" are: (1) the nature and degree of control over the work, and (2) the worker's opportunity for profit or loss. The three secondary factors are: skill required, permanence of the working relationship, and integration into the employer's production.
The proposal extends the same analytical framework to the FMLA and the Migrant and Seasonal Agricultural Worker Protection Act.
The department provides eight fact-specific examples to guide application of the factors.
The public comment period closes at 11:59 p.m. ET on April 28, 2026.
The rule does not affect state classification laws or other federal statutes that use different standards.
The Supreme Court's 2024 Loper Bright decision eliminating Chevron deference adds legal uncertainty to the finalization and enforcement of any new rule.
The regulatory history reflects a recurring pattern of reversal: 2021 (five-factor, core-factors rule) → 2024 (six-factor, totality-of-circumstances rule) → 2026 (proposed return to five-factor, core-factors approach).

Primary Source Author: U.S. Department of Labor, Wage and Hour Division

Primary Source: U.S. Department of Labor, Wage and Hour Division

Primary Source Link: https://www.dol.gov/newsroom/releases/whd/whd20260226