On February 26, 2026, the US Department of Labor announced a proposed rule clarifying the tests for the distinction between employee and independent contractor status. This most important distinction has implications for all employers and drives many legal consequences for employers and employees alike.
The proposed rule applies an economic realities test which focuses on the economic dependance of the worker on a putative employer or on himself or herself.
The factors for the test address the nature and control over the work and the worker’s opportunity for profit or loss based upon initiative or investment by the worker versus a putative employer.
Other factors considered are the skill required, the permanence of the relationship, and if the work is part of an integrated unit of production.
The rule recognizes that the facts of the case matter more than what is contractually or theoretically possible arising out of the relationship between the parties.
Comments to the proposed rule are due on April 28, 2026.
The Employment and Labor Law Team of Sandberg Phoenix provides experienced advice on matters such as the issues addressed by the proposed rule and other employment and labor law issues for employers. Please contact us for advice.
