Whether a particular worker should be classified as an “employee” or an “independent contractor” has been the source of significant litigation over the past several decades. Determining that a worker is an employee gives rise to a large number of protections and benefits for the worker and a corresponding increase in costs for the businesses that engage the worker; in contrast, classification as an independent contractor comes with few protections and lower benefits for the worker and can result in cost savings for the businesses that engage the worker. This dynamic creates a strong incentive for businesses to classify workers as independent contractors, if possible.
Misclassification, however, can lead to significant legal problems. State and federal class actions for unpaid wages and lack of other protections are among the largest and most expensive employment lawsuits that businesses face.
On February 26, 2026, the US Department of Labor (DOL) announced a proposed rule that would, if adopted, revise the way federal regulators view the difference between employees and independent contractors under three federal statutes: the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA), and the Migrant and Seasonal Agricultural Worker Protection Act. However, as we discuss later, this change may not, as it purports to, streamline or simplify the determination between employee and independent contractor.
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