On February 27, 2026, the Department of Labor (DOL)’s Wage and Hour Division (WHD) issued a proposed rule to replace the Biden administration’s 2024 independent contractor regulation with a modified version of the 2021 rule. If finalized, the proposal would shift the framework used to determine employee versus independent contractor status under federal wage and hour law.

Background on the Independent Contractor Rule

Prior to 2021, DOL and federal courts generally applied an “economic reality test” to determine whether a worker qualified as an employee or an independent contractor under the Fair Labor Standards Act (FLSA). The test evaluated six factors that analyze a worker’s relationship with an employer. Courts weighed all six factors equally and considered the totality of the circumstances when making determinations; however, the subjective nature of this approach led to inconsistent and unpredictable court decisions, creating uncertainty for both employers and workers.

In January 2021, near the end of the first Trump administration, WHD issued a final rule on independent contractor classification to address confusion surrounding the economic reality test (the 2021 Rule). The rule identified five non-exhaustive factors drawn from judicial precedent to guide the analysis.

It designated two “core” factors that carry greater weight:

• The nature and degree of control over the work.
• The individual’s opportunity for profit or loss.

The rule placed less emphasis on three additional factors:

• The amount of skill required for the work.
• The degree and permanence of the working relationship.
• Whether the work is part of an integrated unit of production.

The rule took effect in March 2021 despite the Biden administration’s efforts to delay and withdraw it.

In October 2022, the Biden administration issued a proposed rule to rescind the 2021 rule and replace it with a new framework that set forth six non-exhaustive factors as “tools or guides” for conducting a totality-of-the-circumstances analysis. In January 2024, the administration finalized the rule (2024 rule), establishing the following factors:

• The extent to which the work is integral to the employer’s business.
• The worker’s opportunity for profit or loss depending on managerial skill.
• The investments made by the worker and the employer.
• The worker’s use of skill and initiative.
• The permanency of the work relationship.
• The degree of control exercised or retained by the employer.

The 2024 rule weighed each factor equally. The ultimate inquiry focused on whether the worker was economically dependent on the employer. The 2024 rule narrowed the scope of who qualifies as an independent contractor under the FLSA and expanded the interpretation of the traditional economic realities test.

In December 2022, TCIA submitted comments in response to the 2022 proposed rule, expressing concern with the framework. TCIA argued that the regulation could negatively impact the industry’s reliance on professional contract climbers. According to the comments, the rule would complicate worker status determinations for these climbers and could increase litigation risk for tree care companies. TCIA also stated that the rule could hinder tree care companies’ ability to take on higher-volume tree-maintenance jobs, provide on-the-job training (OJT) to inexperienced employees and manage operational costs.

New proposed rule

The 2024 rule faced several legal challenges that remain pending in federal court. In May 2025, WHD issued a Field Assistance Bulletin (FAB) stating that it was reconsidering the rule in light of those challenges. The agency also announced it would no longer enforce the 2024 rule and would instead apply the analysis outlined in WHD Opinion Letter FLSA2019-6.

The 2026 proposed rule would return to a “modified and updated” version of the 2021 rule. In the proposal, WHD expressed concern that the 2024 rule “broadens and generalizes a variation of the longstanding legal analysis in ways that complicate and frustrate its application by workers and businesses” and may set “a higher bar to find independent contractor status than the law requires.”

The proposed rule reinstates the five-factor with two core factors framework, eliminates the 2024 rule’s unweighted totality-of-the-circumstances approach and applies the same classification framework under the FLSA, the Family and Medical Leave Act (FMLA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA). Furthermore, the proposed rule adds the following language on a workers’ economic dependence: “Economic dependence does not focus on the amount of income the worker earns, or whether the worker has other sources of income.” Additionally, the proposed rule modifies and adds occupation-specific examples of worker classifications.

WHD is accepting public comments on the proposed rule for 60 days, with the comment period ending April 28, 2026. The agency will review submitted comments before issuing a final rule. Until the rule is finalized, the 2024 rule remains in effect. However, WHD’s enforcement will continue to reflect the approach outlined in the 2025 FAB.

TCIA will monitor the progression of the rulemaking process and inform members of any significant developments.

Bailey Graves is a senior associate at Ulman Public Policy, TCIA’s Washington, D.C.-based advocacy and lobbying partner.

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