Flip-Flop: Feds Announce A Final Rule On Joint Employer Status And A Proposed Rule On Independent Contractor Status

Takeaways

• The National Labor Relations Board has reinstated its 2020 joint employer standard, requiring substantial direct and immediate control over essential terms and conditions of employment to establish joint employer status.
• The U.S. Department of Labor has proposed rescinding its 2024 independent contractor rule and returning to a Trump-era “economic reality” framework.
• Employers should proactively reassess joint employer relationships and independent contractor classifications in light of these regulatory shifts and the DOL’s anticipated final rule later this spring.

NLRB Returns to 2020 Joint Employer Status Test

On February 26, 2026, the National Labor Relations Board announced a return to the joint employer status test in effect during President Trump’s first administration. The final rule replaces a 2023 Biden-era test that was vacated by an order from the United States District Court for the Eastern District of Texas on March 8, 2024. The Board explained that its final rule replaces the vacated regulatory text with the previous version of its rules that remain in effect after the Texas Order.

The Final Rule emphasizes that the ability to determine terms and conditions of employment is critical for the determination of whether two entities are joint employers:

As previously discussed in Dykema’s Labor and Employment Blog, the Biden-era rule led to significantly more employers being deemed joint employers. That rule stated that if an entity has a say, directly or  indirectly, on one of the following, then the entity is a joint employer:

• Wages, benefits, and other compensation;
• Hours of work and scheduling;
• The assignment of duties to be performed;
• The supervision of the performance of duties;
• Work rules and directions governing the manner, means, and methods of the performance of duties and grounds for discipline;
• The tenure of employment, including hiring and discharge; and
• Working conditions related to the safety and health of employees.

Under its new rule returning to the 2020 standard, the focus will be on the degree of control over terms and conditions of employment. The reinstated rule emphasizes that “the entity must possess and exercise such substantial direct and immediate control over one or more essential terms or conditions of their employment as would warrant finding that the entity meaningfully affects matters relating to the employment relationship with those employees” for joint employer status to be found. This represents a significant departure from the Biden-era rule that allowed for joint employer status for indirect control, or the ability to control without exercising working conditions.

DOL Proposes a New Independent Contractor Test

Also on February 26, 2026, the U.S. Department of Labor announced a proposed rule purporting to clarify the distinction between employees and independent contractors under the Fair Labor Standards Act and related laws. In doing so, it seeks to rescind the Biden-era DOL’s 2024 final rule addressing the employee vs. independent contractor analysis by returning to a more business-logical test quite similar to that promulgated by the prior Trump administration in 2021. The DOL was slated to take this action when it announced a few months ago that it would not enforce the 2024 rule. The 2024 rule was hostile to workers being classified as independent contractors; the proposed rule would make it easier to properly classify workers as independent contractors.

The proposed rule would return to an “economic reality” test focusing on two “core” factors: (1) the employer’s nature and degree of control over the work, and (2) the worker’s opportunity for profit or loss based on initiative and/or investment. The proposed rule explains that the “touchstone” for this analysis is economic dependence, that is, “the dependence that a typical employee has on an employer for work, as opposed to an individual who has more of the nature and character of a business owner who has a separate business. Economic dependence does not focus on the amount of income the worker earns, or whether the worker has other sources of income.”

The DOL’s proposed rule, like the 2021 final rule, lists skill, permanence, and whether the work is a part of an integrated unit of production “as additional guideposts” that are “less probative in the analysis (and, in some cases, may not be probative at all).”

As previously discussed in Dykema’s Labor and Employment Blog, the 2024 final rule dropped the notion of “core” factors and returned to a totality of the circumstances test, listing the following six non-exhaustive factors:

1. The opportunity for profit or loss depending on management skill;
2. The relative investments by the worker and business engaging the worker;
3. The degree of permanence of the work relationship;
4. The nature and degree and control over the worker;
5. The extent to which the work is performed is an integral part of the business; and
6. The worker’s skill and initiative.

Employers should speak with their labor and employment counsel regarding the potential impact of this proposed rule on their operations. Employers should anticipate the DOL to publish a final rule on the updated 2021 test after the public comment window closes on April 28, 2026.

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