Pendulum Swings Again: DOL’s Proposed Rule on Independent Contractors

Why It Matters

The shift could simplify federal classification decisions, but state‑level tests will continue to dictate many employer obligations, making proactive compliance essential.

Key Takeaways

• 2026 DOL rule revives 2021 control‑and‑profit test.
• Applies economic realities analysis to FMLA and MSPA.
• New England courts already have robust contractor classification precedents.
• State ABC tests, like Massachusetts’, remain stricter than federal rule.
• Employers should audit contractor agreements ahead of potential changes.

Pulse Analysis

The classification of workers as employees or independent contractors has long been a moving target in U.S. labor law. Starting with the 1947 Rutherford Food Corp. decision, courts applied a “totality of the circumstances” approach, which evolved into the Department of Labor’s 2021 streamlined test that prioritized control and profit‑or‑loss potential. The Biden administration later broadened the analysis to a six‑factor, worker‑friendly model, only to see the pendulum swing back with the 2026 proposal that reinstates the earlier, more employer‑centric criteria.

The proposed rule narrows the focus to two core factors: the employer’s control over scheduling, project selection and competitive work, and the worker’s ability to earn profits or incur losses based on business acumen and capital investment. Importantly, the DOL clarifies that compliance‑related controls—such as safety or deadline enforcement—do not automatically trigger employee status. By extending this framework to the FMLA and the Migrant and Seasonal Agricultural Worker Protection Act, the agency seeks a uniform standard across multiple labor statutes, potentially reducing litigation over overlapping protections.

For businesses in New England, the practical impact may be limited. The First Circuit already possesses a rich body of case law interpreting the economic‑realities test, and state statutes like Massachusetts’ ABC test impose a higher bar for contractor classification. Consequently, employers must continue to satisfy state requirements even if the federal rule is finalized. A prudent strategy now is to audit existing contractor agreements, ensure clear demarcation of control and profit‑sharing mechanisms, and prepare for a dual compliance landscape where federal and state standards coexist.