The U.S. Department of Labor (DOL) recently published a Notice of Proposed Rulemaking, proposing to change its framework for determining independent contractor classification under the federal Fair Labor Standards Act (FLSA). The proposed rule would replace the current totality-of-the-circumstances analysis with a five-factor test that prioritizes two core factors - providing employers/potential employers with a clearer framework and more predictable outcomes.
DOL is also proposing to extend this analysis to the Migrant and Seasonal Agricultural Protection Act (MSPA) and the Family and Medical Leave Act (FMLA), providing a consistent regulatory framework under all three laws.
Why it Matters to Employers, including Ag Employers
Employers have significant responsibilities under the FLSA in relation to their employees. These obligations do not apply when hiring an independent contractor who is in business for themselves and providing services in that capacity. Certain MSPA provisions and FMLA requirements also turn on whether an employment relationship exists. The responsibility for complying with each law's requirements falls on the potential employer, including the responsibility to determine at the outset whether the law applies to them. The correct classification – employee or independent contractor – is central to this analysis.
Classification for Fair Labor Standards Act (FLSA)
FLSA is the primary, wide-reaching federal employment law. Designed to protect employees, it requires employers to comply with minimum wage, overtime pay, breaks, recordkeeping, and youth employment standards for all employees unless an exemption applies. Protection is not extended to independent contractors in business for themselves. DOL Wage and Hour Division ensures compliance through employer audits and investigations. Violations can result in employer fines, liability for back pay and other damages, and in some cases, criminal penalties.
Wage and Hour regulations prescribe the current test to determine classification under the Fair Labor Standards Act. DOL guidance has changed periodically over the years, vacillating between analyses that make it more likely - and those that make it less likely - to find employee status.
DOL last updated its FLSA employee-independent contractor regulations in 2024, when it issued its Employee or Independent Contractor Classification Under the Fair Labor Standards Act Rule(effective March 11, 2024) . The rule’s “totality of the circumstances” analysis includes six factors, none of which are dispositive or carry a predetermined weight. The rule was challenged in several lawsuits, now pending, awaiting DOL action to rescind the rule.
On May 1, 2025, DOL announced that it would no longer enforce the 2024 rule in its investigations and would instead use alternate criteria “in accordance with Fact Sheet #13 (July 2008)*, and as further informed by Opinion Letter FLSA2019-6 with respect to any matters for which no payment has been made, directly to individuals or to DOL, for back wages and/ or civil money penalties as of May 1, 2025.” See Wage and Hour Field Assistance Bulletin No. 2025-1. The 2024 rule is still in effect for litigation – see 29 CFR Part 795 .
*New* Proposed Rule
On February 27, 2026, DOL Wage and Hour Division published the NRPM, titled Employee or Independent Contractor Status Under the Fair Labor Standards Act, Family and Medical Leave Act, and Migrant and Seasonal Agricultural Worker Protection Act, proposing two separate things:
- to rescind the 2024 Rule
(2) replace the 2024 Rule with an economic reality test based on five factors, identifying two core rules as more probative. The proposed analysis is very similar to DOL’s 2021 Rule, which was rescinded and replaced by the 2024 Rule.
The proposed rule creates a two-tiered analysis, with the core factors considered first. It states that if both core factors support the same classification, the classification is most likely correct. The other factors will serve as additional guideposts, with less, or sometimes no, probative value.
Core factors:
- The nature and degree of control over the work.
- In addition to other things, evaluates whether the individual has control over setting their schedule, choosing projects, and working for others, including competitors.
- Important for agriculture, the proposed rule clarifies that requirements imposed by the potential employer “to comply with specific legal obligations, satisfy health and safety standards, carry insurance, meet contractually agreed-upon deadlines or quality control standards, or satisfy other similar terms that are typical of contractual relationships between businesses,” do not constitute control or make employee or independent contractor status more or less likely.
- The worker’s opportunity for profit or loss.
- Considers the worker’s ability to profit (or incur losses) based on his or her exercise of initiative - such as managerial skill, business acumen or judgment. Also considers the individual’s management of their investment or expenditures as related to profit potential - for example, hiring helpers or purchasing equipment.
Other factors:
- The amount of skill required for the work.
- Focuses on training and skill with the general premise being that an individual “who is in business for him- or herself typically brings his or her own skills to the job rather than relying on the client to provide training.”
- The permanence of the working relationship.
- Considers permanence, but also that it is not always probative, stating that a long-term relationship points toward, but does not always indicate an employment relationship.
- Whether the work is part of an integrated unit of production.
- Considers whether the services the individual provides are segregable from the potential employer’s production process (leans in favor of independent contractor), or integrated (leans in favor of employee).
Both the proposed rule and the 2024 rule aim to capture the economic reality of the arrangement, assessing whether a worker is economically dependent on themselves or on the employer, with the latter supporting independent employee classification.
Proposed Rule would also apply to MSPA, FMLA
DOL proposes to extend its analysis for determining worker classification to the Migrant and Seasonal Agricultural Worker Protection Act (MSPA) and the Family and Medical Leave Act (FMLA), both of which are also enforced by DOL Wage and Hour Division and considered during employer audits and investigations.
The federal Migrant and Seasonal Agricultural Worker Protection Act (MSPA) requires covered employers to comply with wage, housing, transportation, disclosure, and recordkeeping standards for both migrant and seasonal employees. MSPA incorporates the FLSA definition of "employ," and regulations promulgated under MSPA include similar, but not identical, factors to those in FLSA regulations.
FMLA requires covered employers to allow eligible employees to take unpaid, job-protected leave for certain family and medical reasons and to continue group health insurance coverage. Employers with 50 or more employees in 20 or more workweeks, in the current or preceding calendar year, must comply with the law. FMLA also incorporates the FLSA definition of employer. Regulations discuss the need to determine the economic reality of the relationship, but do not include specific factors to analyze employee vs. independent contractor classification.
Aligning the classification frameworks for FLSA, MSPA, and FLMA would provide employers with a single standard based on the proposed rule’s core-factor analysis.
Other Employment Laws
It’s worth noting that while DOL’s proposed rule would create consistency among FLSA, MSPA, and FMLA regulations, it would not change the standards for worker classification included in other federal or state laws and rules, such as the Internal Revenue Code, state wage and hour laws, workers’ compensation regulations, unemployment laws, and labor relations laws. Separate analysis must be done under each law.
What is Next?
The Notice of Proposed Rulemaking is not a final rule, and is open for public comment through April 28, 2026. After the comment period closes, we expect DOL to publish a final rule. Until that time, the 2024 rule remains in effect, however, DOL is currently not enforcing it in employer investigations.